The totipotent embryonic stem cell generates various mesodermal cells when stimulated with BMP4. Among the resulting cells, those expressing flk-1 and/or PDGFRalpha displayed chondrogenic activity in the presence of TGFbeta3 and expressed cartilage-specific genes in 7 to 16 day pellet cultures. Depositions of cartilage matrix and type II collagen were detected by day 14. TGFbeta-stimulated chondrogenesis was synergistically enhanced by PDGF-BB, resulting in a larger cartilage particle filled with a cartilaginous area containing type II collagen, with a surface cell layer expressing type I collagen. In contrast, noggin inhibited both the TGFbeta- and TGFbeta+PDGF-stimulated cartilage formation, suggesting that a BMP-dependent pathway is involved. In fact, replacement of TGFbeta3 with BMP4 on days 10 to 12 markedly elevated the cartilage matrix deposition during the following 7 to 8 days. Moreover, culture with TGFbeta3 and PDGF-BB, followed by the incubation with BMP4 alone, resulted in a cartilage particle lacking type I collagen in the matrix and the surface layer, which suggests hyaline cartilage formation. Furthermore, such hyaline cartilage particles were mineralized. These studies indicate that the PDGFRalpha+ and/or flk-1+ cells derived from embryonic stem cells possess the full developmental potential toward chondrocytes, in common with embryonic mesenchymal cells.