Summary Background Differentiated cells derived from pluripotent human embryonic stem (hES) cells offer the opportunity for new transplantation therapies. However, hES cells and their differentiated progeny express highly polymorphic MHC molecules that serve as major graft rejection antigens to the immune system of allogeneic hosts. To achieve sustained engraftment of donor cells, strategies must be developed to overcome graft rejection without broadly suppressing host immunity. One approach entails induction of donor-specific immune tolerance by establishing chimeric engraftment in hosts with haemopoietic cells derived from an existing hES cell line. We aimed to develop methods to efficiently differentiate hES cells to haemopoietic cells, including immune-modulating leucocytes, a prerequisite of the tolerance induction strategies applying to hES cell-mediated transplantation. Methods We developed a method to generate a broad range of haemopoietic cells from hES-generated embryonic bodies in the absence of murine stromal feeder cells. Embryonic bodies were further cultured in the presence of haemopoietic cytokines. In addition to flow cytometric analyses of haemopoietic cell markers, we analysed the hES cell-derived haemopoietic cells by colony-forming assays (for erythroid and myeloid progenitor cells), cytochemical staining, and mixed leucocyte reactions to determine the functional capacity of the generated antigen-presenting cells. Findings 12 independent experiments were done. When selected growth factors were added, leucocytes expressing CD45 were generated and released into culture media for 6–7 weeks. Under the condition used, both erythroid and myeloid progenitor cells were generated. About 25% of the generated leucocytes acquired MHC class II and costimulatory molecule expression. These hES-derived, MHC class II+ leucocytes resembled dendritic cells and macrophages, and they functioned as antigen-presenting cells capable of eliciting allogeneic CD4 and CD8 T-cell responses in culture. Interpretation The hES cell-derived antigen-presenting cells could be used to regulate alloreactive T cells and induce immune tolerance for improvement of the transplant acceptance of hES-cell derivatives.