In an effort to study basic principles of marker gene activation during myeloid lineage development, we established an in vitro differentiation system for macrophages based on mouse embryonic stem (ES) cells. Under the influence of defined cytokines, ES cells gave rise to a cell population consisting predominantly of macrophages. We could show, that expression of the mouse lysozyme M gene is a faithful internal standard for indicating the proportion of macrophage cells in the differentiation culture. This controlled in vitro differentiation system can be used for quantitative studies on transgene activation. Undifferentiated ES cells were stably transfected with a construct carrying the chicken lysozyme gene locus, which had been shown previously to express lysozyme RNA cell type specifically and position independently in macrophages of transgenic mice. In undifferentiated transfected ES cell clones, the transgene was consistently inactive. Upon in vitro differentiation, the transgene was expressed exclusively in macrophages and its level of activity was independent of the chromosomal site of integration. The in vitro cell differentiation system presented here will be useful to study the cis- and trans-regulatory requirements of myeloid-specific gene activation and the influence of hematopoietic regulators on myelopoiesis through their effect on transfected marker gene expression.