In recent years the multipotent extraembryonic endoderm (XEN) stem cells have been the center of much attention. In vivo, XEN cells contribute to the formation of the extraembryonic endoderm, visceral and parietal endoderm and later on, the yolk sac. Recent data have shown that the distinction between embryonic and extraembryonic endoderm is not as strict as previously thought due to the integration, and not the displacement, of the visceral endoderm into the definitive embryonic endoderm. Therefore, cells from the extraembryonic endoderm also contribute to definitive endoderm. Many research groups focused on unraveling the potential and ability of XEN cells to both support differentiation and/or differentiate into endoderm‐like tissues as an alternative to embryonic stem (ES) cells. Moreover, the conversion of ES to XEN cells, shown recently without genetic manipulations, uncovers significant and novel molecular mechanisms involved in extraembryonic endoderm and definitive endoderm development. XEN cell lines provide a unique model for an early mammalian lineage that complements the established ES and trophoblast stem cell lines. Through the study of essential genes and signaling requirements for XEN cells in vitro, insights will be gained about the developmental program of the extraembryonic and embryonic endodermal lineage in vivo. This review will provide an overview on the current literature focusing on XEN cells as a model for primitive endoderm and possibly definitive endoderm as well as the potential of using these cells for therapeutic applications.