Human embryonic stem (hES) cells can self-renew, which enables them to have considerable expansion potential, and are pluripotent. If their differentiation can be controlled, they can offer promise for clinical programs in cell therapies. A novel strategy has been developed to derive early hepatocytic lineage stages from hES cells using four sequential inducing steps lasting 16 days. First, embryoid bodies (EBs) were generated by growing hES cells in suspension for 2 days; second, EBs were lineage restricted to definitive endoderm with 3 days of treatment with human activin A; third, cells were differentiated further by coculturing for 5 days with human fetal liver stromal cells (hFLSCs) made transgenic to stably release basic fibroblast growth factor (bFGF); fourth, treating them for 6 days with soluble signals comprised of hFLSC-derived bFGF, hepatocyte growth factor, oncostatin M, and dexamethasone. Induced cells displayed morphological, immunohistochemical, and biochemical characteristics of hepatocytic committed progenitors and of early lineage stage hepatocytes found in zone 1 of the liver acinus. They expressed alpha-fetoprotein, albumin, cytokeratin 18, glycogen, a fetal P450 isoform, and CYP1B1, and demonstrated indocyanine green uptake and excretion. In conclusion, we have developed a novel method to lineage restrict hES cells into early lineage stages of hepatocytic fates.