Stem cells have the potential to significantly improve cell and tissue regeneration therapies, but little is understood about how to control their behavior. We investigated the potential differentiation capability of cells derived from human embryonic germ (EG) cells into musculoskeletal lineages by providing a three-dimensional environment with increased cell-cell contact and growth factors. Cells were clustered into pellets to mimic the mesenchyme condensation process during limb development. LVEC cells, an embryoid body-derived (EBD) cell culture generated from EG cells, were cultured in micromass pellets for 21 days in the presence of bone morphogenetic protein 2 (BMP2) and/or transforming growth factor beta-3 (TGFbeta3). Gene expression for cartilage-, bone-, and muscle-specific matrix proteins--including collagen types I, II, III, IX, X; aggrecan; cartilage proteoglycan link protein; cartilage oligomeric protein; chondroitin sulfate-4-S; and myf5--was upregulated in the pellets treated with TGFbeta3, while mRNAs for neurofilament heavy (NFH), a neuron marker, and flk-1, a hematopoietic marker, decreased. Total collagen and proteoglycan production exhibited a time-dependent increase in the pellets treated with TGFbeta3, further confirming the expression of characteristic musculoskeletal markers. Furthermore, our results indicate the ability to select or differentiate stem cells toward a musculoskeletal lineage from a heterogenous EBD cell line.