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Embryonic stem (ES) cells have the capacity to differentiate to every cell type that constitutes fetal or adult tissues. To trace and quantitatively assess the differentiation of ES cells into gut endodermal cells, we used an ES cell line with the lacZ gene inserted into the pdx-1 locus. Targeted mutations of pdx-1 in mice demonstrate that pdx-1 is required for pancreatic and rostral duodenal development; therefore, pdx-1 serves as an excellent early gut regional specific marker. When these ES cells were differentiated by removal of leukemia inhibitory factor (LIF), only fractional cells turned into lacZ positive, which indicates pancreatic-duodenal differentiation. Co-cultivation of ES cells with pancreatic rudiments induced a significant increase in the proportion of lacZ positive cell numbers and this increase was further enhanced by forced expression of a chick putative endoderm inducer gene, cmix. Transforming growth factor (TGF)-β2 mimicked the effects of pancreatic rudiments and this effect was enhanced by cmix expression. Expression analysis showed over-expression of cmix induced endodermal marker genes. These data indicate that one can make use of this knowledge on molecular events of embryonic development to drive ES cells to differentiate into pdx-1 expressing endodermal cells in vitro.