Embryonic stem (ES) cells have the capacity to differentiate into all cells of the developing embryo and may provide a renewable resource for future cell replacement therapies. The addition of bone morphogenetic protein 4 (BMP4) to serum-free ES cell culture has previously been shown to induce transcription factors, signaling molecules, and cell adhesion proteins expressed during mesoderm specification of the embryo. Here, we show the dynamics of primitive streak mesoderm differentiation in ES cells is comparable between serum and serum-free embryoid body (EB) cultures, supplemented with BMP4. Furthermore, we show a delayed wave of expression of a cohort of genes (Pax2, WT1, podocalyxin, pod-1, and nephrin), which play important roles during embryonic kidney development. The paired box transcription factor, Pax2, is one of the earliest genes expressed during kidney organogenesis and is required for normal urogenital development. ES cell lines containing either a modified Pax2 promoter-lacZ or bacterial artificial chromosome-green fluorescent protein (GFP) transgene were generated, which enabled the quantitative analysis of kidney rather than neuronal Pax2 expression within EBs. Both beta-galactosidase activity and GFP expression were detected by immunohistochemical and flow cytometric analysis following 16 days of EB culture, which correlated with an increase in Pax2 transcript levels. Together, these results suggest a spontaneous kidney gene expression program develops in mature EBs grown in both serum and serum-free conditions, when supplemented with BMP4. Further, the recombinant growth factors BMP2, BMP4, and BMP7 strongly influence gene expression within mesoderm induced EBs. BMP4 promotes ventral (blood) and intermediate (kidney) mesoderm gene expression, whereas BMP2 and BMP7 promote kidney outcomes at the expense of hematopoietic commitment. This induction assay and these unique ES cell lines will be useful for the generation of mesoderm-derived cell populations with implications for future cell therapeutic/integration assays.