Human embryonic stem cells (hESCs) provide an important means to characterize early stages of hematopoietic development. However, the in vivo potential of hESC-derived hematopoietic cells has not been well defined. We demonstrate that hESC-derived cells are capable of long-term hematopoietic engraftment when transplanted into nonobese diabetic/severe combined immunodeficient (NOD/SCID) mice. Human CD45(+) and CD34(+) cells are identified in the mouse bone marrow (BM) more than 3 months after injection of hESCs that were allowed to differentiate on S17 stromal cells for 7-24 days. Secondary engraftment studies further confirm long-term repopulating cells derived from hESCs. We also evaluated two mechanisms that may inhibit engraftment: host immunity and requirement for homing to BM. Treatment with anti-ASGM1 antiserum that primarily acts by depletion of natural killer cells in transplanted mice leads to improved engraftment, likely due to low levels of HLA class I expressed on hESCs and CD34(+) cells derived from hESCs. Intra-BM injection also provided stable engraftment, with hematopoietic cells identified in both the injected and contra-lateral femur. Importantly, no teratomas are evident in animals injected with differentiated hESCs. These results demonstrate that SCID-repopulating cells, a close surrogate for hematopoietic stem cells, can be derived from hESCs. Moreover, both adaptive and innate immune effector cells may be barriers to engraftment of these cells.