Trophoblast differentiation and early placental development are essential for the establishment of pregnancy, yet these critical events are not readily investigated in human pregnancy. We used embryoid bodies (EBs) prepared from human embryonic stem (hES) cells as an in vitro model of early human development. The levels of human chorionic gonadotropin (hCG), progesterone, and estradiol-17beta in medium from hES cell-derived EBs grown in suspension culture for 1 wk were higher than unconditioned culture medium or medium from undifferentiated hES cells or spontaneously differentiated hES cell colonies. EBs were explanted into Matrigel (MG) "rafts" and cultured for up to 53 d. During the first 7-10 d of three-dimensional growth in MG, small protrusions appeared on the outer surface of EBs, some of which subsequently extended into multicellular outgrowths. The secretion of hCG, progesterone, and estradiol-17beta began to increase on approximately d 20 of MG culture and remained dramatically elevated over the next 30 d. EBs maintained in suspension culture failed to demonstrate this elevation in hormone secretion. Suspension-cultured and MG-embedded EBs exhibited widespread expression of cytokeratins 7/8, demonstrating extensive epithelial differentiation as well as consistent hCG expression. We propose that hES cell-derived EBs may be a useful model for investigation of human trophoblast differentiation and placental morphogenesis.