To understand the endothelial cell (EC) development, arterial, venous, and lymphatic EC (LEC) have been successfully induced from embryonic stem cells (ESC). However, tissue-specific EC, such as hepatic sinusoidal EC (HSEC), have never been generated from ESC. Based on the findings that TGF beta/activin signaling negatively regulates differentiation of both LEC and HSEC, and that HSEC and LEC are distinguishable by the expression of market genes, we assessed the role of TGF beta/activin signaling in EC development from ESC. Here we show that the inhibition of TGF beta/activin signaling by a TGF beta receptor I (TGF beta RI) kinase inhibitor increased the expression of Lyve1 and stabilin2 but not podoplanin in CD31(+)CD34(+) EC derived from ESC. EC generated by the inhibition of TGFJ.iR1 signaling also exhibited stronger endocytic activity than control EC, indicating that their phenotype is similar to fetal HSEC. Our results reveal that TGFO/activin signaling negatively regulates the early events of HSEC differentiation. (c) 2008 Elsevier Inc. All rights reserved.