The extraembryonic endoderm of mammals is essential for nutritive support of the fetus and patterning of the early embryo. Visceral and parietal endoderm are major subtypes of this lineage with the former exhibiting most, if not all, of the embryonic patterning properties. Extraembryonic endoderm (XEN) cell lines derived from the primitive endoderm of mouse blastocysts represent a cell culture model of this lineage, but are biased towards parietal endoderm in culture and in chimeras. In an effort to promote XEN cells to adopt visceral endoderm character we have mimicked different aspects of the in vivo environment. We found that BMP signaling promoted a mesenchymal-to-epithelial transition of XEN cells with up-regulation of E-cadherin and down-regulation of vimentin. Gene expression analysis showed the differentiated XEN cells most resembled extraembryonic visceral endoderm (exVE), a subtype of VE covering the extraembryonic ectoderm in the early embryo, and during gastrulation it combines with extraembryonic mesoderm to form the definitive yolk sac. We found that laminin, a major component of the extracellular matrix in the early embryo, synergised with BMP to promote highly efficient conversion of XEN cells to exVE. Inhibition of BMP signaling with the chemical inhibitor, Dorsomorphin, prevented this conversion suggesting that Smad1/5/8 activity is critical for exVE induction of XEN cells. Finally, we show that applying our new culture conditions to freshly isolated parietal endoderm (PE) from Reichert's membrane promoted VE differentiation showing that the PE is developmentally plastic and can be reprogrammed to a VE state in response to BMP. Generation of visceral endoderm from XEN cells uncovers the true potential of these blastocyst-derived cells and is a significant step towards modelling early developmental events ex vivo.