Manipulation of gene function in embryonic stem cells by either over expression or downregulation is critical for understanding their subsequent cell fate. We have developed a tetracycline-inducible short hairpin RNA interference (shRNAi) for human embryonic stem cells (hESCs) and demonstrated doxycycline dose-dependent knockdown of the transcription factor OCT4 and the cell surface antigen beta2-microglobulin. The induced knockdown of OCT4 resulted in rapid differentiation of hESCs with a significant increase in transcription of genes associated with trophoblast and endoderm lineages, the extent of which was controlled by the degree of induction. Transgene toxicity, which may occur in conditional over-expression strategies with hESCs, was not observed with wild-type Tet repressor protein. The system allows efficient, reversible, and long-term downregulation of target genes in hESCs and enables the generation of stable transfectants for the knockdown of genes essential for cell survival and self-renewal, not necessarily possible by nonconditional shRNAi methods. STEM CELLS 2009;27:776-782.