Embryonic stem cells are derived from the inner cell mass of the pre-implantation blastocyst, and can both self-renew and differentiate into all the cells and tissues of the body. The embryonic stem cell is an unsurpassed starting material to begin to understand a critical, largely inaccessible, period of development, as well as an important source of cells for transplantation and gene therapy. Despite their potential, attempts to obtain specific cell types from embryonic stem cells have been only partially successful because many of the growth factor combinations and developmental control genes involved in cell type restricted differentiation are unknown. This article summarizes some of the recent advances in promoting lineage restricted differentiation of embryonic stem cells, focusing on growth factor manipulation, or genetically altering embryonic stem cells to produce a desired phenotype. The two approaches epitomize current scientific concerns regarding the therapeutic use of these cells; genetic alterations will produce more pure cells with the risk of increasing the likelihood of malignant transformation; epigenetic methods for the manipulation of stem cell phenotype are often incomplete and remaining pluripotent cells are likely to form teratomas. As more is known about lineage specification during development, it will be possible to more precisely control cell type specification.