Nodal signaling induces the formation of the endoderm and mesoderm during gastrulation. Nodal expression persists until the definitive endoderm progenitor has completely formed, and disappears thereafter. A tightly regulated Nodal expression system is essential for the differentiation of embryonic stem (ES) cells into distinct tissue lineages. On this basis, we established an ES cell differentiation system with the tetracycline-regulated expression of Nodal. The upregulated Nodal signaling pathway and its downstream transcriptional targets induced the specification of ES cells into definitive endoderm and mesoderm derivatives, and the subsequent downregulation of Nodal signaling promoted further maturation of the gut tube both in vitro and in vivo. Sustained expression of the Nodal gene inhibited the maturation of the definitive endoderm owing to persistent Oct3 and/or Oct4 expression and teratoma formation. Furthermore, quantitative single cell analysis by flow cytometry using CXCR4, VEGFR2 and PDGFR-alpha indicated that this protocol for definitive endoderm and mesoderm differentiation is superior to any other available protocol. Our findings also indicated that the Nodal or Nodal-related molecules secreted from Nodal-expressing ES cells could cause genetically unmanipulated ES cells to induce the expression of the Nodal signaling pathway and its downstream targets, which consequently leads to the differentiation of the ES cells into definitive endoderm and mesoderm. Our differentiation system, using tightly regulated Nodal expression, enabled us to investigate the mechanism of ES cell differentiation into definitive endoderm or mesoderm derivatives. Our findings also demonstrate that Nodal-expressing ES cells might be a source of highly active proteins that could be used for developing endoderm or mesoderm tissues in regenerative medicine.