Abstract Human embryonic stem cells (hESCs), which have the potential to generate virtually any differentiated progeny, are an attractive cell source for transplantation therapy, regenerative medicine, and tissue engineering. To realize this potential, it is essential to be able to control ESC differentiation and to direct the development of these cells along specific pathways. Basic science in the field of embryonic development, stem cell differentiation, and tissue engineering has offered important insights into key pathways and scaffolds that regulate hESC differentiation, which have produced advances in modeling gastrulation in culture and in the efficient induction of endoderm, mesoderm, ectoderm, and many of their downstream derivatives. These findings have lead to identification of several pathways controlling the differentiation of hESCs into mesodermal derivatives such as myoblasts, mesenchymal cells, osteoblasts, chondrocytes, adipocytes, as well as hemangioblastic derivatives. The next challenge will be to demonstrate the functional utility of these cells, both in vitro and in preclinical models of bone and vascular diseases