Hepatoblasts have the potential to differentiate into both hepatocytes and biliary epithelial cells through a differentiation program that has not been fully elucidated. With the aim to better define the mechanism of differentiation of hepatoblasts, we isolated hepatoblasts and established new culture systems. We isolated hepatoblasts from E12.5 fetal mouse liver using E-cadherin. The E-cadherin+ cells expressed alpha-fetoprotein and albumin, but not cytokeratin 19. Transplantation of the E-cadherin+ cells into mice that had been subjected to liver injury or biliary epithelial injury led to differentiation of the cells into hepatocytes or biliary epithelial cells, respectively. In a low cell density culture system in the absence of additional growth factors, E-cadherin+ cells formed colonies of various sizes largely comprising albumin-positive cells. Supplementation of the culture medium with HGF+EGF promoted proliferation of the cells. Thus, the low cell density culture system should be useful to identify inductive factors that regulate the proliferation and differentiation of hepatoblasts. In a high cell density system in the presence of oncostatin M/ dexamethasone, E14.5, but not E12.5, E-cadherin+ cells differentiated into mature hepatocytes, suggesting that unidentified factors are involved in hepatic maturation. Culture of E-cadherin+ cells derived from E12.5 or E14.5 liver under high cell density conditions should allow elucidation of the mechanism of hepatic differentiation in greater detail. These new culture systems should be of use to identify growth factors that induce hepatoblasts to proliferate or differentiate into hepatocytes and biliary epithelial cells.