Embryonic stem (ES) cells can be cultured indefinitely, differentiated into many cell types in vitro, thus providing a potentially unlimited supply of cells for cell-based therapy. We recently reported the efficient derivation of ectodermal and epidermal cells from murine ES cells. These differentiated ES cells are able to form, in culture, a multilayered epidermis coupled with an underlying dermal compartment, similar to native skin. This model demons- trates that ES cells have the potential to recapitulate the reciprocal instructive ectodermal-mesodermal commitments, characteristic of embryonic skin formation, clarifies the role of the morphogen BMP-4 in the binary neuroectodermal choice and provides a powerful tool for the study of molecular mechanisms controlling skin development and multipotent epidermal stem cell properties. Its potential for cutaneous cell therapy and dermatocosmetological applications is discussed.