Elucidating the molecular mechanisms involved in the differentiation of stem cells to hepatic cells is critical for both understanding normal developmental processes as well as for optimizing the generation of functional hepatic cells for therapy. We performed in vitro differentiation of mouse embryonic stem cells (mESCs) with a null mutation in the homeobox gene Hhex and show that Hhex(-/-) mESCs fail to differentiate from definitive endoderm (Sox17(+/)Foxa2(+)) to hepatic endoderm (Alb(+)/Dlk(+)). In addition, hepatic culture elicited a >7-fold increase in Vegfa mRNA expression in Hhex(-/-) cells compared to Hhex(+/+) cells. Furthermore, we identified VEGFR2(+)/ALB(+/)CD34(-) in early Hhex(+/+) hepatic cultures. These cells were absent in Hhex(-/-) cultures. Finally, through manipulation of Hhex and Vegfa expression, gain and loss of expression experiments revealed that Hhex shares an inverse relationship with the activity of the Vegf signaling pathway in supporting hepatic differentiation. In summary, our results suggest that Hhex represses Vegf signaling during hepatic differentiation of mouse ESCs allowing for cell-type autonomous regulation of Vegfr2 activity independent of endothelial cells.