Renal lineages including kidney are derived from intermediate mesoderm, which are differentiated from a subset of caudal undifferentiated mesoderm. The inductive mechanisms of mammalian intermediate mesoderm and renal lineages are still poorly understood. Mouse embryonic stem cells (mESCs) can be a good in vitro model to reconstitute the developmental pathway of renal lineages and to analyze the mechanisms of the sequential differentiation. We examined the effects of Activin A and retinoic acid (RA) on the induction of intermediate mesoderm from mESCs under defined, serum-free, adherent, monolayer culture conditions. We measured the expression level of intermediate mesodermal marker genes and examined the developmental potential of the differentiated cells into kidney using an ex vivo transplantation assay. Adding Activin A followed by RA to mESC cultures induced the expression of marker genes and proteins for intermediate mesoderm, odd-skipped related 1 (Osr1) and Wilm�s Tumor 1 (Wt1). These differentiated cells integrated into laminin-positive tubular cells and Pax2-positive renal cells in cultured embryonic kidney explants. We demonstrated that intermediate mesodermal marker expression was also induced by RA receptor (RAR) agonist, but not by retinoid X receptor (RXR) agonists. Furthermore, the expression of these markers was decreased by RAR antagonists. We directed the differentiation of mESCs into intermediate mesoderm using Activin A and RA and revealed the role of RAR signaling in this differentiation. These methods and findings will improve our understanding of renal lineage development and could contribute to the regenerative medicine of kidney.