Human embryonic stem cells (hES cells) have unlimited self-renewal capacity and can differentiate into most, if not all, possible cell types. This unique property makes them valuable not only for investigation of early developmental processes, but also for regenerative medicine. Mesoderm-derived cardiac cells and hematopoietic cells both have the potential for various therapeutic applications. However, efficient induction of hES cell differentiation into mesoderm remains a challenge. Here, we showed that treatment of hES cells with bone morphogenetic protein-4 (BMP-4) exhibited differential effects: long-term treatment results in trophoblast and extra-embryonic endoderm differentiation, whereas short-term treatment can promote early mesoderm induction. The induction of mesoderm in hES cells occurs at a high efficiency as measured using several markers, such as Brachyury, WNT3, and MIXL1 expression. Moreover, these mesoderm progenitor cells can differentiate into cardiac and hematopoietic lineages in vitro. Further analysis showed that the mesoderm-inducing capacity of BMP-4 requires endogenous FGF and TGF-beta/Nodal/activin signaling activities. Thus, our results uncover a novel role for BMP-4 in regulation of hES cell differentiation and should provide insights into the mechanism of mesoderm induction in hES cells.