Harnessing the ability of genetically manipulated human embryonic stem cells (hESC) to differentiate into appropriate lineages could revolutionize medical practice. These cells have the theoretical potential to develop into all mature cell types; however, the actual ability to develop into all hematopoietic lineages has not been demonstrated. Using sequential in vitro coculture on murine bone marrow stromal cells, and engraftment into human thymic tissues in immunodeficient mice, we demonstrate that hESC can differentiate through the T lymphoid lineage. Stable transgene expression was maintained at high levels throughout differentiation, suggesting that genetically manipulated hESC hold potential to treat several T cell disorders.