Insulin-secreting pancreatic beta cells play a key role in the pathogenesis of diabetes mellitus. Potential new treatments for this disease include cell-replacement therapies using embryonic stem cells (ESCs). We have generated ESCs from a transgenic mouse model, mouse insulin 1 promoter (MIP) green fluorescent protein (GFP) mice, in which embryonic and adult beta cells are genetically tagged with GFP. The aim of the present study is to examine the differentiation potential of MIP-GFP ESCs in the microenvironment of the kidney capsule. The ESCs grew rapidly and formed a teratoma with GFP-expressing beta-like cells present in clusters that formed a cord-like structure similar to what is seen in the embryonic pancreas. These structures also included glucagon-expressing alpha cells and amylase-expressing acinar cells. Electron microscopic analysis showed insulin-like granules in columnar epithelium with microvilli adjacent to exocrine-like granule-containing cells. The MIP-GFP ESCs should be a useful research tool to study the differentiation capacity of ESCs toward pancreatic lineages.