Embryonic stem cell-derived hepatocyte precursor cells represent a promising model for clinical transplantations to diseased livers, as well as for establishment of in vitro systems for drug metabolism and toxicology investigations. This study aimed to establish an in vitro culture system for scalable generation of hepatic progenitor cells. We used stable transgenic clones of murine embryonic stem cells possessing a reporter/selection vector, in which the enhanced green fluorescent protein- and puromycin N-acetyltransferase-coding genes are driven by a common alpha-fetoprotein gene promoter. This allowed for "live" monitoring and puromycin selection of the desired differentiating cell type possessing the activated alpha-fetoprotein gene. A rotary culture system was established, sequentially yielding initially partially selected hepatocyte lineage-committed cells, and finally, a highly purified cell population maintained as a dynamic suspension spheroid culture, which progressively developed the hepatic gene expression phenotype. The latter was confirmed by quantitative RT-PCR analysis, which showed a progressive up-regulation of hepatic genes during spheroid culture, indicating development of a mixed hepatocyte precursor-/fetal hepatocyte-like cell population. Adherent spheroids gave rise to advanced differentiated hepatocyte-like cells expressing hepatic proteins such as albumin, alpha-1-antitrypsin, cytokeratin 18, E-cadherin, and liver-specific organic anion transporter 1, as demonstrated by fluorescent immunostaining. A fraction of adherent cells was capable of glycogen storage and of reversible up-take of indocyanine green, demonstrating their hepatocyte-like functionality. Moreover, after transplantation of spheroids into the mouse liver, the spheroid-derived cells integrated into recipient. These results demonstrate that large-scale hepatocyte precursor-/hepatocyte-like cultures can be established for use in clinical trials, as well as in in vitro screening assays.