Human pluripotent stem cells (hPSCs) provide unprecedented opportunities to study the earliest stages of human development in vitro and have the potential to provide unlimited new sources of cells for regenerative medicine. Although previous studies have reported cytokeratin 14+/p63+ keratinocyte generation from hPSCs, the multipotent progenitors of epithelial lineages have not been described and the developmental pathways regulating epithelial commitment remain largely unknown. Here we report membrane localization of β-catenin during retinoic acid (RA)--induced epithelial differentiation. In addition hPSC treatment with the Src family kinase inhibitor SU6656 modulated β-catenin localization and produced an enriched population of simple epithelial cells under defined culture conditions. SU6656 strongly upregulated expression of cytokeratins 18 and 8 (K18/K8), which are expressed in simple epithelial cells, while repressing expression of the pluripotency gene Oct4. This homogeneous population of K18+K8+Oct4- simple epithelial precursor cells can further differentiate into cells expressing keratinocyte or corneal-specific markers. These enriched hPSC-derived simple epithelial cells may provide a ready source for development and toxicology cell models and may serve as a progenitor for epithelial cell transplantation applications.