Pluripotent embryonic stem (ES) cells and induced pluripotent stem (iPS) cells recently developed in our laboratory can be used to generate the much needed insulin producing cells (IPCs) for the treatment of type 1 diabetes. However, currently available differentiation protocols generate IPCs at a very low frequency. More importantly, it is difficult to purify the IPCs from the mixed cell population due to the lack of well characterized pancreatic beta cell-specific cell surface markers. Subsequently, multiple studies have been published with limited success. A major cause for these poor results is an inadequate Pdx1 expression in the embryoid body (EB) or definitive endoderm (DE)-derived precursors. Here we investigated whether ectopic expression of pancreatic and duodenal homeobox 1 (Pdx1), an essential pancreatic transcription factor, in mouse ES cells leads to enhanced differentiation into IPCs. Here we describe a new approach for the generation of glucose responsive IPCs using ES cells ectopically expressing pancreatic and duodenal homeobox 1 (Pdx1) and paired box gene 4 (Pax4).