Previous studies have shown that early mouse embryos with both FGF-4 alleles inactivated are developmentally arrested shortly after implantation. To understand the roles of FGF-4 during early development, we prepared genetically engineered embryonic stem (ES) cells, which are unable to produce FGF-4. Specifically, we describe the isolation and characterization of ES cells with both FGF-4 alleles inactivated. The FGF-4^−/−ES cells do not require FGF-4 to proliferatein vitro,and addition of FGF-4 to the medium has little or no effect on their growth. Thus, FGF-4 does not appear to act as an autocrine growth factor for cultured ES cells. We also demonstrate that FGF-4^−/−ES cells, like their unmodified counterparts, are capable of forming highly complex tumors in syngeneic mice composed of a wide range of differentiated cells types, including neural tissue, glandular epithelium, and muscle. In addition, we demonstrate that the FGF-4^−/−ES cells can differentiatein vitroafter exposure to retinoic acid; however, the growth and/or survival of the differentiated cells is severely compromised. Importantly, addition of FGF-4 to the culture medium dramatically increases the number of differentiated cells derived from the FGF-4^−/−ES cells, in particular cells with many of the properties of parietal extraembryonic endoderm. Finally, we demonstrate that there are differences in the RNA profiles expressed by the differentiated progeny formedin vitrofrom FGF-4^−/−ES cells and FGF-4^+/+ES cells when they are cultured with FGF-4. Taken together, the studies described in this report indicate that certain lineages formedin vitroare affected by the inactivation of the FGF-4 gene, in particular specific cells that form during the initial stage of ES cell differentiation. Thus, ES cells with both FGF-4 alleles inactivated should shed light on the important roles of FGF-4 during the early stages of mammalian development and help determine why FGF-4^−/−embryos die shortly after implantation.