BACKGROUND: Recent studies have identified stem/progenitor cells in human and mouse uterine epithelium, which are postulated to be responsible for tissue regeneration and proliferative disorders of human endometrium. These progenitor cells are thought to be derived from Mullerian duct (MD), the primordial female reproductive tract (FRT). METHODOLOGY/PRINCIPAL FINDINGS: We have developed a model of human reproductive tract development in which inductive neonatal mouse uterine mesenchyme (nMUM) is recombined with green fluorescent protein (GFP)-tagged human embryonic stem cells (hESCs); GFP-hESC (ENVY). We demonstrate for the first time that hESCs can be differentiated into cells with a human FRT epithelial cell phenotype. hESC derived FRT epithelial cells emerged from cultures containing MIXL1(+) mesendodermal precursors, paralleling events occurring during normal organogenesis. Following transplantation, nMUM treated embryoid bodies (EBs) generated epithelial structures with a typical MD phenotype that expressed the MD markers PAX2, HOXA10. Functionally, the hESCs derived FRT epithelium responded to exogenous estrogen by proliferating and secreting uterine-specific glycodelin A (GdA). CONCLUSIONS/SIGNIFICANCE: These data show nMUM can induce differentiation of hESC to form the FRT epithelium. This may provide a model to study early developmental events of the human FRT.