The potential use of embryonic stem (ES) cells for cell therapy of diabetes requires improved methods for differentiation and isolation of insulin-producing beta-cells. The signal transduction protein SHB may be involved in both angiogenesis and beta-cell development. Here we show that cells expressing the pancreatic endodermal marker PDX-1 appear in the vicinity of vascular structures in ES cell-derived embryoid bodies (EBs) cultured in vitro. Moreover, overexpression of SHB as well as culture of EBs in presence of the angiogenic growth factors PDGF or VEGF enhanced the expression of PDX-1 and/or insulin mRNA. Finally, expression of GFP under control of the PDX-1 promoter in EBs allowed for the enrichment by FACS of cells expressing PDX-1, C-peptide, and insulin as determined by immunofluorescence. It is concluded that SHB and angiogenic factors promote the development of cells expressing PDX-1 and insulin in EBs and that such cells can be separated by FACS. (c) 2006 Elsevier Inc. All rights reserved.