Leukemia inhibitory factor (LIF) is a mammalian cytokine that has a wide range of physiological activities, including the inhibition of differentiation of embryonic stem (ES) cells. We have used insertional mutagenesis in an attempt to isolate molecules that participate in LIF signal transduction via the LIF receptor. Using a robust screen for undifferentiated cells, we have isolated one ES cell line, Poly 27, that does not require exogenous LIF to remain undifferentiated in vitro. We present evidence that Poly 27 is not irreversibly committed to an undifferentiated phenotype, but can differentiate in vitro if cultured in the presence of chemical differentiating agents, while in syngeneic mice Poly 27 cells form tumours which are composed largely of undifferentiated cells. We have characterized the mechanism of factor independence in Poly 27, and shown it to be a result of autocrine LIF production. This LIF production is potentially the result of a mutation in a gene critically involved in regulating LIF production in ES cells.