A method for stimulating the differentiation of human pluripotent stem cells into kidney lineages remains to be developed. Most cells in kidney are derived from an embryonic germ layer known as intermediate mesoderm. Here we show the establishment of an efficient system of homologous recombination in human pluripotent stem cells by means of bacterial artificial chromosome-based vectors and single-nucleotide polymorphism array-based detection. This system allowed us to generate human-induced pluripotent stem cell lines containing green fluorescence protein knocked into OSR1, a specific intermediate mesoderm marker. We have also established a robust induction protocol for intermediate mesoderm, which produces up to 90% OSR1(+) cells. These human intermediate mesoderm cells can differentiate into multiple cell types of intermediate mesoderm-derived organs in vitro and in vivo, thereby supplying a useful system to elucidate the mechanisms of intermediate mesoderm development and potentially providing a cell source for regenerative therapies of the kidney.