Differentiation of hESCs into functional hepatic cells uses fully defined culture conditions, which recapitulate essential stages of liver development. Cells generated under these conditions exhibit hepatic functions in vitro, including glycogen storage, cytochrome activity, and low-density lipoprotein uptake. In vivo, following transduction with GFP and transplantation into uPA transgenic mice, differentiated cells engrafted into the liver, grow and express human albumin and 1-antitrypsin as well as GFP, for at least 8 weeks.