The molecular events of cardiac lineage specification and differentiation are largely unknown. Here we describe the involvement of a growth factor with an EGF-like domain, Cripto-1 (Cr-1), in cardiac differentiation. During embryonic development, Cr-1 is expressed in the mouse blastocyst, primitive streak, and later is restricted to the developing heart. To investigate the role of Cr-1, we have generated Cr-1-negative embryonic stem (ES) cell lines by homologous recombination. The resulting double “knockout” ES cells have selectively lost the ability to form beating cardiac myocytes, a process that can be rescued by reintroducing Cr-1 gene back into the Cr(−/−) cells. Furthermore, the lack of functional Cr-1 is correlated with absence of expression of cardiac-specific myosin light and heavy chain genes during differentiation. Differentiation into other cell types including skeletal muscle is not disrupted. These results suggest that Cr-1 is essential for contractile cardiomyocyte formationin vitro.