Embryonic stem (ES) cells provide a unique source for tissue regeneration. We examined whether mouse ES cells can efficiently differentiate into transplantable hepatocytes. ES cells were implanted into mouse livers 24 hours after carbon tetrachloride intoxication; ES-derived cells with several hepatocyte-cell-markers were generated. They were able to grow in vitro and showed morphology consistent with typical mature hepatocytes and expressed hepatocyte-specific genes. After transplantation into the carbon tetrachloride-injured mouse liver, ES-derived green fluorescent protein-positive cells were incorporated into liver tissue and rescued mice from hepatic injury. No teratoma formation was observed in the transplant recipients. In conclusion, ES cells can provide a valuable tool for studying the molecular basis for differentiation of hepatocytes and form the basis for cell therapies.