The mechanisms controlling endodermal development during stem cell differentiation have been only partly elucidated, although previous studies have suggested the participation of fibroblast growth factor (FGF) and activin A in these processes. Shb is a Src homology 2 (SH2) domain-containing adapter protein that has been implicated in FGF receptor 1 (FGFR1) signaling. To study the putative crosstalk between activin A and Shb-dependent FGF signaling in the differentiation of endoderm from embryonic stem (ES) cells, embryoid bodies (EBs) derived from mouse ES cells overexpressing wild-type Shb or Shb with a mutated SH2 domain (R522K-Shb) were cultured in the presence of activin A. We show that expression of R522K-Shb results in up-regulation of FGFR1 and FGF2 in EBs. Addition of activin A to the cultures enhances the expression of endodermal genes primarily in EBs expressing mutant Shb. Inhibition of FGF signaling by the addition of the FGFR1 inhibitor SU5402 completely counteracts the synergistic effects of R522K-Shb and activin A. In conclusion, the present results suggest that expression of R522K-Shb enhances certain signaling pathways downstream of FGF and that an interplay between FGF and activin A participates in ES cell differentiation to endoderm.