The efficient generation of mesenchymal cells such as adipocytes, osteoblasts, and chondrocytes from embryonic stem cells is achieved by following sequential steps: embryoid body formation, retinoic acid (RA) treatment, and exposure to specific reagents for differentiation. RA treatment of embryoid bodies is critical for subsequent mesengenesis. Adipogenesis, osteogenesis, and chondrogenesis occur by culturing outgrowths for 2-3 wk with insulin/triiodothyronine, bone morphogenetic protein/dexamethasone-β/glycerophosphate/ ascorbic acid, and transforming growth factor-β₃/parathyroid hormone/1% fetal bovine serum, respectively. Emergence of these mesenchymal cells using a common initial procedure suggests that embryoid body formation and subsequent RA treatment results in the generation of a common progenitor for osteoblasts and chondrocytes.