This work has focused on improving our knowledge of the thyroid specification process. Thyroid cells are derived from mouse embryonic stem cells (mESCs) by directed differentiation through multiple intermediate developmental stages, including anterior foregut endoderm (AFE), prior to NKX2-1+ thyroid progenitor specification. To investigate if transient Nkx2-1 expression can increase the efficiency of thyroid specification, we utilized a mESC line double knock-in GFP-T/hCD4-Foxa2 with a doxycycline inducible (Tet-On) Nkx2-1 transgene. Transient activation of the Nkx2-1 transgene at the AFE stage leads to stable induction of high levels of endogenous Nkx2-1 as well as early and mature thyroid-specific markers including Pax8, Foxe1, Tg, Nis, and Tshr. Lung and neuronal NKX2-1+ lineages were not derived in this system. The thyroid progeny mature and organize into follicle-like structures in 3D culture. These follicles express adherens and tight junction proteins indicative of an epithelial character and produce the thyroid hormone thyroxine (T4) in the presence of iodide. Critical determinants of thyroid lineage specification have been revealed by variations in developmental stage timing, signaling pathways, and sorting of AFE-stage subpopulations. To provide further insights into the mechanisms of thyroid specification, RNA-Seq data acquired from relevant stages has identified potential genes involved in early thyroid development. The results demonstrate that Nkx2-1 can act as a stage-specific inductive signal during directed differentiation of mESCs to thyroid follicular cells. We have also developed a mouse model to recapitulate these results in an in vivo context. This work has provided novel insights into thyroid specification and provides an efficient system for deriving and studying thyroid cells, which can be used for in vitro modeling of development and disease.