Normal cellular models able to efficiently recapitulate intestinal epithelial cell differentiation in culture are not yet available. The aim of this work was to establish and genetically characterize a mesenchymal-epithelial co-culture system in order to identify transcriptional regulators involved in this process. The deposition of rat intestinal epithelial cells on human intestinal mesenchymal cells led to the formation of clustered structures that expanded shortly after seeding. These structures were composed of polarized epithelial cells with brush borders and cell junction complexes. A rat genechip statistical analysis performed at different time points during this process identified Hepatocyte-nuclear-factor-4alpha (HNF-4) and Hepatocyte-nuclear-factor-1alpha (HNF-1) as being induced coincidently with the apparition of polarized epithelial structures. Stable introduction of HNF-4 in undifferentiated epithelial cells alone led to the rapid induction of HNF-1 and several intestinal specific markers and metabolism-related genes for which mRNA was identified to be up-regulated during epithelial differentiation. HNF-4 was capable to transactivate the calbindin 3 gene promoter, a process that was synergistically increased in the presence of HNF-1. When HNF-4 expressing cells were plated on mesenchymal cells, an epithelial monolayer formed rapidly with the apparition of dome structures that are characteristics of vectorial ion transport. Forced expression of HNF-1 alone did not result in dome structures formation. In sum, this novel co-culture system functionally identified for the first time HNF-4 as an important modulator of intestinal epithelial differentiation and offers an innovative opportunity to investigate molecular mechanisms involved in this process.