Embryonic stem cells (ESCs) have been promised as a renewable source for regenerative medicine, including providing a replacement therapy in type 1 diabetes. However, they have not yet been differentiated into functional insulin-secreting β cells. This is due partially to the knowledge gap regarding the transcription factors (TFs) required for pancreas development. We hypothesize that, if directed differentiation in vitro recapitulates the developmental process in vivo, ESCs provide a powerful model to discover novel pancreatic TF genes. Guided by knowledge of their normal development and using RT-PCR and immunochemical analyses, we have established protocols for directed differentiation of mouse ESCs into pancreatic progenitors. Microarray analyses of these differentiating ESC cells at days 0, 4, 8 and 15 confirmed their sequential differentiation. By day 15, we found up-regulation of a group of pancreatic progenitor marker genes including Pdx1, Ptf1a, Nkx6.1, Pax4 and Pax6. Consistently, Pdx1-immunoreactive cells were detected on day 15. Most of these Pdx1+ cells also expressed Nkx6.1. Bioinformatic analyses of sequential datasets allowed identification of over 20 novel TF genes potentially important for pancreas development. The dynamic expression of representative known and novel genes was confirmed by quantitative real time RT-PCR analysis. This strategy may be modified to study novel regulatory molecules for development of other tissue and organ systems.