ABSTRACT Embryonic stem (ES) cell-derived endoderm is critical for the development of cellular therapies for diabetes, liver disease, and emphysema. Here, we describe a novel approach to induce endoderm using fibronectin-coated collagen gels. This technique resulted in a homogenous endoderm-like cell population, demonstrating endoderm-specific gene and protein expression as well as the differentiation potential of definitive endoderm. To establish a role for the TGFβ-Superfamily, we studied activin, and its soluble inhibitor, follistatin. Activin, normally an endoderm inducer, caused a dose-dependent 80% decrease in the Foxa2 positive endoderm fraction, while follistatin increased the Foxa2 positive endoderm fraction to 78%. Kinetic studies suggest that activin alters the endoderm fraction by altering the expression kinetics of its transient precursor, the epiblast. Subcutaneous implantation of activin-treated cells in a syngeneic mouse generated a heterogeneous teratoma-like mass, indicating this population was indeed primitive. In contrast , non-treated cells and follistatin-treated cells resulted in an encapsulated epithelial-like mass, indicating these cells remained committed to the endoderm lineage. In conclusion, we demonstrate a novel technique to induce the direct differentiation of endoderm in vitro without requiring cell sorting, the ability to induce critical, transient precursors with activin, and a new endoderm-enrichment technique using follistatin.