The cellular response to fibroblast growth factors (FGFs) is mediated by receptor tyrosine kinases (FGFR-1 - 4) whose patterns of expression are spatially and temporally restricted during embryogenesis. These receptors have differential ligand binding capacities and are coupled to diverse signalling pathways. In the present study, we have characterized the ability of FGFR-1-deficient mouse embryonic stem (ES) cells to bind FGF-2 and to proliferate in the absence or presence of exogenous FGF-2. Under the same conditions, we also analysed the differentiation of FGFR-1-deficient ES cells into three dimensional, post-implantation, embryonic tissues, known as embryoid bodies (EBs). We show that the targeted disruption of FGFR-1 leads to a reduced binding of FGF-2 which has no significant effect on the proliferation of undifferentiated ES cells. In addition, lack of functional FGFR-1 in differentiating EBs leads to a reduced expression of the endoderm marker gene alpha-fetoprotein (AFP). This deregulation of the AFP gene correlates with defects in the formation of the visceral endoderm, proper differentiation of the ectoderm and thus the organization of the columnar epithelium, and a block of cavitation. Although the addition of exogenous FGF-2 further reduced the expression of AFPmRNA in differentiating mutant EBs, corresponding morphological changes were not observed. Our results indicate that FGFR-1 may play a vital role in endoderm formation.