Recently significant progress has been made in differentiating embryonic stem (ES) cells toward pancreatic cells. However, little is known about the generation and identification of pancreatic progenitor cells from ES cells. Here we explored the influence of sodium butyrate on pancreatic progenitor differentiation, and investigated the different effects of sodium butyrate on pancreatic and hepatic progenitor formation. Our results indicated that different concentration and exposure time of sodium butyrate led to different differentiating trends of ES cells. A relatively lower concentration of sodium butyrate with shorter exposure time induced more pancreatic progenitor cell formation. When stimulated by a higher concentration and longer exposure time of sodium butyrate, ES cells differentiated toward hepatic progenitor cells rather than pancreatic progenitor cells. These progenitor cells could further mature into pancreatic and hepatic cells with the supplement of exogenous inducing factors. The resulting pancreatic cells expressed specific markers such as insulin and C-peptide, and were capable of insulin secretion in response to glucose stimulation. The differentiated hepatocytes were characterized by the expression of a number of liver-associated genes and proteins, and had the capability of glycogen storage. Thus, the current study demonstrated that sodium butyrate played different roles in inducing ES cells toward pancreatic or hepatic progenitor cells. These progenitor cells could be further induced into mature pancreatic cells and hepatocytes. This finding may facilitate the understanding of pancreatic and hepatic cell differentiation from ES cells, and provide a potential source of transplantable cells for cell-replacement therapies.