Embryonic stem (ES) cells can be differentiated in vitro into a variety of cell lineages. In vitro differentiation of ES cells, therefore, provides a model system for organogenesis as well as an innovative approach for regenerative medicine. However, current in vitro hepatic differentiation systems from ES cells require embryoid body formation, and such systems achieve quite low differentiation efficacy. In this study, in order to examine a system for preparation of significant numbers of hepatocytes from ES cells, mouse ES cells were directly differentiated into hepatocyte-like cells using monolayer culture conditions, and their hepatic characteristics were examined. ES cells were cultured on gelatin-coated plates for 3 days in ES cell medium containing leukemia inhibitory factor (100 units mL-1) and retinoic acid (10-8 M). After 3 days, the cells were harvested by trypsinization and cultured on gelatin-coated plates for 5 days in ES cell medium containing acidic fibroblast growth factor (aFGF; 100 ng mL-1), FGF4 (20 ng mL-1), and human growth factor (50 ng mL-1). After 5 days, the cells were passaged on type I collagen-coated plates for 2 days in ES cell medium containing Oncostatin M (10 ng mL-1), followed by additional culture in modified William's E medium containing 5% FBS and dexamethasone (10-7 M) for 7 days. For characterizing the differentiated ES cells, the cells were examined for albumin production by immunocytochemistry, and the expression profiles of hepatic genes by RT-PCR. For analyzing their hepatic function, the cells were examined for glycogen production by PAS staining, and their metabolic activities of ammonia elimination and urea synthesis were measured. After 10 days of culture, almost all cells showed albumin production by immunofluoresence. RT-PCR analysis showed expression of various genes specific for hepatocytes, such as ALB, AFP, TTR, and HNF3�, but not HNF4α, and genes specific for matured hepatocytes, such as PEPCK, TAT, G6P, and Cyp7a1. After 11 days of culture, glycogen production was partially detected in the hepatocyte-like cells by PAS staining. Although ammonia elimination activity of hepatocyte-like cells was shown to be significantly lower than that of the primary culture of fetal hepatocytes after 24 and 48 h of treatment (P < 0.05), its metabolic activity was acquired at the level of about 40% of that of fetal hepatocytes. Hepatocyte-like cells also showed lower activity of urea synthesis than fetal hepatocytes at 6, 12, and 24 h of treatment (P < 0.05), but this activity increased thereafter and reached about 70% of that of fetal hepatocytes after 48 h of treatment. These results demonstrated that monolayer culture conditions for ES cell differentiation could provide an in vitro system to produce significant numbers of hepatocytes. This work was supported by a Grant-in-Aid for the 21st Century Center of Excellence Program of the MEXT, Japan, and by a Grant-in-Aid for Scientific Research from the Japan Society for the Promotion of Science.