We report here the identification and characterization of a novel paired-like homeobox-containing gene (Ehox). This gene, identified in embryonic stem (ES) cells, is differentially expressed during in vitro ES cell differentiation. We have assessed Ehox function using the ES cell in vitro differentiation system. This has involved molecular and biological analyses of the effects of sense or antisense Ehox expression (using episomal vectors) on ES cell differentiation. Analysis of antisense Ehox-expressing ES cells indicates that they are unable to express marker genes associated with hematopoietic, endothelial, or cardiac differentiation following removal of leukemia inhibitory factor. In contrast, overexpression of Ehox using the sense construct accelerated the appearance of these differentiation markers. ES cell self-renewal and differentiation assays reveal that inhibition of Ehox activity results in the maintenance of a stem cell phenotype in limiting concentrations of leukemia inhibitory factor and the almost complete impairment of the cardiomyocyte differentiation capacity of these cells. We therefore conclude that Ehox is a novel homeobox-containing gene that is essential for the earliest stages of murine ES cell differentiation.