Human ESCs (hESCs) respond to signals that determine their pluripotency, proliferation, survival, and differentiation status. In this report, we demonstrate that phosphatidylinositol 3-kinase (PI3K) antagonizes the ability of hESCs to differentiate in response to transforming growth factor beta family members such as Activin A and Nodal. Inhibition of PI3K signaling efficiently promotes differentiation of hESCs into mesendoderm and then definitive endoderm (DE) by allowing them to be specified by Activin/Nodal signals present in hESC cultures. Under conditions where hESCs are grown in mouse embryo fibroblast-conditioned medium under feeder-free conditions, approximately 70%-80% are converted into DE following 5 days of treatment with inhibitors of the PI3K pathway, such as LY 294002 and AKT1-II. Microarray and quantitative polymerase chain reaction-based gene expression profiling demonstrates that definitive endoderm formation under these conditions closely parallels that following specification with elevated Activin A and low fetal calf serum (FCS)/knockout serum replacement (KSR). Reduced insulin/insulin-like growth factor (IGF) signaling was found to be critical for cell fate commitment into DE. Levels of insulin/IGF present in FCS/KSR, normally used to promote self-renewal of hESCs, antagonized differentiation. In summary, we show that generation of hESC-DE requires two conditions: signaling by Activin/Nodal family members and release from inhibitory signals generated by PI3K through insulin/IGF. These findings have important implications for our understanding of hESC self-renewal and early cell fate decisions.