Organ systems play essential roles in the physiological functions required for homeostasis. A 3D integumentary organ system (3D-IOS) comprises the skin and skin appendages such as hair follicles and sebaceous glands. This protocol describes how to induce the differentiation of murine induced pluripotent stem (iPS) cells into a 3D-IOS. First, iPS cells are grown for 7 d under conditions that encourage the formation of embryoid bodies (EBs). The iPS cell-derived EBs are stimulated by Wnt10b one day before transplantation of multiple EBs in vivo (a method we describe as the clustering-dependent embryoid body (CDB) transplantation method). After a further 30 d, the transplanted EBs will have differentiated into a 3D-IOS containing mature hair follicles and sebaceous glands. These can be removed and transplanted into wounds in the skin of other mice. After transplantation of a 3D-IOS, the organ system shows full physiological function in vivo starting 14 d following transplant. Thus, this protocol enables a whole functional organ system to be generated from pluripotent stem cells.