During mouse embryogenesis GATA-4 is expressed first in primitive endoderm and then in definitive endoderm derivatives, including glandular stomach and intestine. To explore the role of GATA-4 in specification of definitive gastric endoderm, we generated chimeric mice by introducing Gata4(-/-) ES cells into ROSA26 morulae or blastocysts. In E14.5 chimeras, Gata4(-/-) cells were represented in endoderm lining the proximal and distal stomach. These cells expressed early cytodifferentiation markers, including GATA-6 and ApoJ. However, by E18.5, only rare patches of Gata4(-/-) epithelium were evident in the distal stomach. This heterotypic epithelium had a squamous morphology and did not express markers associated with differentiation of gastric epithelial cell lineages. Sonic Hedgehog, an endoderm-derived signaling molecule normally down-regulated in the distal stomach, was overexpressed in Gata4(-/-) cells. We conclude that GATA-4-deficient cells have an intrinsic defect in their ability to differentiate. Similarities in the phenotypes of Gata4(-/-) chimeras and mice with other genetically engineered mutations that affect gut development suggest that GATA-4 may be involved in the gastric epithelial response to members of the TGF-beta superfamily.