The direct transformation of one somatic cell type into another somatic cell type would be beneficial for producing isogenic replacement cells for therapeutic use. Various approaches for altering cell fate are being developed, including methods for differentiating stem cells isolated from somatic tissues. This chapter describes a procedure for turning one somatic cell type (the "donor" cell) into another somatic "target" cell type using cellular extracts. The method also can be used to promote differentiation of a somatic stem cell along a specific pathway. The procedure involves permeabilization of the donor cell, incubation of the permeabilized cell in a nuclear and cytoplasmic extract derived from the target cell type, the resealing of donor cell membrane, and culture. Cells can be analyzed for induction of new gene and protein expression, as well as for the establishment of cellular functions specific to the target cell type. We also describe a slight modification of the procedure to allow analysis of extract-induced chromatin remodeling in nuclei purified from somatic cells. Because large numbers of cells and nuclei can be treated in cell extracts and because extracts can be fractionated or supplemented with various agents, this system constitutes a powerful tool to examine the molecular mechanisms of nuclear reprogramming and of cell differentiation, at least as they take place in vitro.