Embryonic stem (ES) cells derived from pre-implantation embryos have the potential to differentiate into any cell type derived from the three germ layers of ectoderm (epidermal tissues and nerves), mesoderm (muscle, bone, blood), and endoderm (liver, pancreas, gastrointestinal tract, lungs), including fetal and adult cells. Alone, these cells do not develop into a viable fetus or adult animal because they do not retain the potential to contribute to extraembryonic tissue, and in vitro, they lack spatial and temporal signaling cues essential to normal in vivo development. The basis of pluripotentiality resides in conserved regulatory networks composed of numerous transcription factors and multiple signaling cascades. Together, these regulatory networks maintain ES cells in a pluripotent and undifferentiated form; however, alterations in the stoichiometry of these signals promote differentiation. By taking advantage of this differentiation capacity in vitro, ES cells have clearly been shown to possess the potential to generate multipotent stem and progenitor cells capable of differentiating into a limited number of cell fates. These latter types of cells may prove to be therapeutically viable, but perhaps more importantly, the studies of these cells have led to a greater understanding of mammalian development.