Human embryonic stem (ES) cells are undifferentiated, pluripotent cells that can be maintained indefinitely in culture. Here we demonstrate that human ES cells differentiate to hematopoietic precursor cells when cocultured with the murine bone marrow cell line S17 or the yolk sac endothelial cell line C166. This hematopoietic differentiation requires fetal bovine serum, but no other exogenous cytokines. ES cell-derived hematopoietic precursor cells express the cell surface antigen CD34 and the hematopoietic transcription factors TAL-1, LMO-2, and GATA-2. When cultured on semisolid media with hematopoietic growth factors, these hematopoietic precursor cells form characteristic myeloid, erythroid, and megakaryocyte colonies. Selection for CD34(+) cells derived from human ES cells enriches for hematopoietic colony-forming cells, similar to CD34 selection of primary hematopoietic tissue (bone marrow, umbilical cord blood). More terminally differentiated hematopoietic cells derived from human ES cells under these conditions also express normal surface antigens: glycophorin A on erythroid cells, CD15 on myeloid cells, and CD41 on megakaryocytes. The in vitro differentiation of human ES cells provides an opportunity to better understand human hematopoiesis and could lead to a novel source of cells for transfusion and transplantation therapies.