The potential to generate virtually any differentiated cell type from embryonic stem cells (ESCs) offers the possibility to establish new models of mammalian development and to create new sources of cells for regenerative medicine. To realize this potential, it is essential to be able to control ESC differentiation and to direct the development of these cells along specific pathways. Embryology has offered important insights into key pathways regulating ESC differentiation, resulting in advances in modeling gastrulation in culture and in the efficient induction of endoderm, mesoderm, and ectoderm and many of their downstream derivatives. This has led to the identification of new multipotential progenitors for the hematopoietic, neural, and cardiovascular lineages and to the development of protocols for the efficient generation of a broad spectrum of cell types including hematopoietic cells, cardiomyocytes, oligodendrocytes, dopamine neurons, and immature pancreatic beta cells. The next challenge will be to demonstrate the functional utility of these cells, both in vitro and in preclinical models of human disease.