Human embryonic stem cells (HESCs), pluripotent cells derived from the inner cell mass (ICM) of human blastocysts, represent a novel tool for the study of early human developmental events. When cultured in suspension with serum, HESCs form spherical structures resembling embryoid bodies (EBs). We show that differentiation of HESCs within EBs occurs radially, with central cells then undergoing apoptosis in association with EB cavitation. Cells within the outer layer of cavitating EBs display stage-specific immunoreactivity to pan-keratin, cytokeratin-8, GATA6, α-fetoprotein, and transthyretin specific antibodies, and hybridization to disabled-2, GATA4, and GATA6 specific riboprobes. Transmission electron microscopy of these cells reveals clathrin-coated micropinocytotic vesicles, microvilli, and many vacuoles, a phenotype consistent with mouse visceral endoderm (VE) rather than mouse definitive or parietal endoderm. When cultured in media supplemented with the BMP inhibitor noggin, or in the absence of serum, HESC derivatives do not develop the mouse VE-like phenotype. The addition of BMP-4 to noggin-treated HESCs cultured in serum or in serum-free conditions reconstituted development of the VE-like phenotype. These data demonstrate that human EBs undergo developmental events similar to those of mouse EBs and that in vitro BMP signalling induces derivatives of the human ICM to express a phenotype similar to mouse VE.