Embryonic stem (ES) cells provide a flexible and unlimited source for a variety of neuronal types. Because mature neurons establish neuronal networks very easily, we tested whether ES-derived neurons are capable of generating functional networks and whether these networks, generated in vitro, are capable of processing information. Single-cell electrophysiology with pharmacological antagonists demonstrated the presence of both excitatory and inhibitory synaptic connections. Extracellular recording with planar multielectrode arrays showed that spontaneous bursts of electrical activity are present in ES-derived networks with properties remarkably similar to those of hippocampal neurons. When stimulated with extracellular electrodes, ES-derived neurons fired action potentials, and the evoked electrical activity spread throughout the culture. A statistical analysis indicated that ES-derived networks discriminated between stimuli of different intensity at a single trial level, a key feature for an efficient information processing. Thus, ES-derived neurons provide a novel in vitro strategy to create functional networks with defined computational properties.