A panel of genetic markers was used to assess the in vitro commitment of murine embryonic stem (ES) cells toward the endoderm-derived pancreas and to distinguish insulin-expressing cells of this lineage from other lineages such as neuron, liver, and yolk sac. There are two nonallelic insulin genes in mice. Neuronal cells express only insulin II, whereas the pancreas expresses both insulin I and II. Yolk sac and fetal liver express predominately insulin II, small amounts of insulin I, and no glucagon. We found that ES-derived embryoid bodies cultured in the presence of stage-specific concentrations of monothio-glycerol and 15% fetal calf serum, followed by serum-free conditions, give rise to a population that expresses insulin I, insulin II, pdx-1 (a pancreas marker), and Sox17 (an endoderm marker). Immunohistochemical staining shows intracellular insulin particles, and its de novo production was confirmed by staining for C-peptide. Most, but not all, of the insulin+ or C-peptide+ cells coexpress glucagon, demonstrating a differentiation pathway to pancreas rather than yolk sac or fetal liver. Addition of beta-cell specification and differentiation factors activin beta B, nicotinamide, and exendin-4 to later-stage culture increased insulin-positive cells to 2.73% of the total population, compared with the control culture, which gave rise to less than 1% insulin-staining cells. These findings suggest that stepwise culture manipulations can direct ES cells to become early endocrine pancreas.