Reprogrammed somatic cells offer a valuable source of pluripotent cells that have the potential to differentiate into many cells types and provide a new tool for regenerative medicine. In the present study we differentiated induced pluripotent stem cells (iPS cells) into hepatic cells. We first showed that mouse iPS cells could from a complete liver in mouse embryo (E14.5) including hepatocytes, endothelial cells, sinusoidal cells and resident macrophages. We then designed a highly efficient hepatocyte differentiation protocol using defined factors on human embryonic stem cells (ES cells). This protocol was found to generate more than 80% albumin expressing cells that show hepatic functions and express most of liver genes as shown by microarray analyses. Similar results were obtained when human iPS cells were induced to differentiate following the same procedure.