Abstract: Differentiation of human pluripotent stem cells, such as human embryonic stem cells (hESC), into hepatocytes by in vitro methods is disclosed. The pluripotent stem cells are cultured in conditioned medium from the hepatocarcinoma cell line, HepG2. Specific growth factors and defined media may also be added to the medium for stage specific differentiation of the derived hepatocytes. Hepatocytes differentiated from human pluripotent stem cells may be characterized by fluorescence activated cell sorting (FACS), immunofluorescence analysis (IF), real time polymerase reaction (RT-PCR), and functional assays. The methods disclosed herein are able to differentiate high percentages of hepatocytes from human pluripotent stem cells using the disclosed methods. These differentiated cells may exhibit polygonal shape morphology, typical of hepatocytes, and may express hepatocyte specific genes. The differentiated cells may also be positive for definitive endoderm markers and hepatic markers.