Occludin is the only known integral membrane protein of tight junctions (TJs), and is now believed to be directly involved in the barrier and fence functions of TJs. Occludin-deficient embryonic stem (ES) cells were generated by targeted disruption of both alleles of the occludin gene. When these cells were subjected to suspension culture, they aggregated to form simple, and then cystic embryoid bodies (EBs) with the same time course as EB formation from wild-type ES cells. Immunofluorescence microscopy and ultrathin section electron microscopy revealed that polarized epithelial (visceral endoderm-like) cells were differentiated to delineate EBs not only from wild-type but also from occludin-deficient ES cells. Freeze fracture analyses indicated no significant differences in number or morphology of TJ strands between wild-type and occludin-deficient epithelial cells. Furthermore, zonula occludens (ZO)-1, a TJ-associated peripheral membrane protein, was still exclusively concentrated at TJ in occludin-deficient epithelial cells. In good agreement with these morphological observations, TJ in occludin-deficient epithelial cells functioned as a primary barrier to the diffusion of a low molecular mass tracer through the paracellular pathway. These findings indicate that there are as yet unidentified TJ integral membrane protein(s) which can form strand structures, recruit ZO-1, and function as a barrier without occludin.