Embryonic stem cells, totipotent cells of the early mouse embryo, were established as permanent cell lines of undifferentiated cells. ES cells provide an important cellular system in developmental biology for the manipulation of preselected genes in mice by using the gene targeting technology. Embryonic stem cells, when cultivated as embryo-like aggregates, so-called 'embryoid bodies', are able to differentiate in vitro into derivatives of all three primary germ layers, the endoderm, ectoderm and mesoderm. We established differentiation protocols for the in vitro development of undifferentiated embryonic stem cells into differentiated cardiomyocytes, skeletal muscle, neuronal, epithelial and vascular smooth muscle cells. During differentiation, tissue-specific genes, proteins, ion channels, receptors and action potentials were expressed in a developmentally controlled pattern. This pattern closely recapitulates the developmental pattern during embryogenesis in the living organism. In vitro, the controlled developmental pattern was found to be influenced by differentiation and growth factor molecules or by xenobiotics. Furthermore, the differentiation system has been used for genetic analyses by 'gain of function' and 'loss of function' approaches in vitro.