The differentiation and formation of the primitive endoderm in early embryos can be mimicked in vitro by the aggregation of embryonic stem cells to form embryoid bodies. We present morphological evidence that primitive endoderm cells often first locate in the interior of embryoid bodies and subsequently migrate to the surface. Cell mixing experiments indicate that surface positioning is an intrinsic property of endoderm epithelial cells. Moreover, Disabled-2 (Dab2) is required for surface sorting and positioning of the endoderm cells: when Dab2 expression was eliminated, the differentiated endoderm epithelial cells distributed throughout the interior of the embryoid bodies. Surprisingly, E-cadherin is dispensable for primitive endoderm differentiation and surface sorting in embryoid bodies. These results support the model that primitive endoderm cells first emerge in the interior of the inner cell mass and are subsequently sorted to the surface to form the primitive endoderm.