Embryonic stem (ES) cells isolated from late blastocysts can now be maintained in culture in an undifferentiated state provided they are grown in the presence of a specific differentiation inhibitor, known variously as leukaemia inhibiting factor (LIF) or differentiation inhibiting activity (DIA), found at high concentrations in medium conditioned by Buffalo rat liver (BRL) cells. ES cells acquired a differentiated phenotype in monolayer, either when in the absence of LIF/DIA or in the presence of retinoic acid (RA). We have now characterized this bipotential differentiation of ES cells in terms of a series of extracellular matrix and cell surface proteins as well as cytokeratin expression, and compared it with the changes observed during the differentiation of two embryonal carcinoma (EC) cell lines, P19 and F9. ES cells exposed to RA in the presence of LIF/DIA largely resembled F9 EC + RA after 5 days, while ES cells deprived of LIF/DIA formed a culture with mixed phenotype resembling P19 EC + RA. This study therefore establishes the predominantly parietal endoderm-like phenotype of cells derived from ES by RA induction, and suggests that a mixed population of endoderm- and ill-defined mesoderm-like cells are formed after removal of specific inhibitor(s) of differentiation.