The excitement and controversy surrounding the potential role of human embryonic stem (ES) cells in transplantation therapy have often overshadowed their potentially more important use as a basic research tool for understanding the development and function of human tissues. Human ES cells can proliferate without a known limit and can form advanced derivatives of all three embryonic germ layers. What is less widely appreciated is that human ES cells can also form the extra-embryonic tissues that differentiate from the embryo before gastrulation. The use of human ES cells to derive early human trophoblast is particularly valuable, because it is difficult to obtain from other sources and is significantly different from mouse trophoblast. Here we show that bone morphogenetic protein 4 (BMP4), a member of the transforming growth factor-beta (TGF-beta) superfamily, induces the differentiation of human ES cells to trophoblast. DNA microarray, RT-PCR, and immunoassay analyses demonstrate that the differentiated cells express a range of trophoblast markers and secrete placental hormones. When plated at low density, the BMP4-treated cells form syncytia that express chorionic gonadotrophin (CG). These results underscore fundamental differences between human and mouse ES cells, which differentiate poorly, if at all, to trophoblast. Human ES cells thus provide a tool for studying the differentiation and function of early human trophoblast and could provide a new understanding of some of the earliest differentiation events of human postimplantation development.