Human embryonic stem cells (hESC) represent a new source of stem cells that can be propagated and expanded in vitro indefinitely, providing a potentially inexhaustible and donorless source of cells for human therapy. The ability to create banks of hESC lines with matched or reduced incompatibility could potentially reduce or eliminate the need for immunosuppressive drugs and/or immunomodulatory protocols altogether, for example, O-type RhD(-) lines for generation of universal red blood cells (RBC). Hematopoietic differentiation of hESCs has been extensively investigated in vitro, and hematopoietic precursors as well as differentiated progeny representing erythroid, myeloid, macrophage, megakaryocytic, and lymphoid lineages have been identified in differentiating hESC cultures. Previous studies also generated primitive erythroid cells from hESCs by embryoid body (EB) formation and coculturing with stromal cells. However, the efficient and controlled differentiation of hESCs into homogeneous RBC populations with oxygen-carrying capacity has not been previously achieved. In this chapter, we describe a robust system that can efficiently generate large numbers of hemangioblasts from multiple hESC lines using well-defined conditions and produce functional homogeneous RBCs with oxygen-carrying capacity in large scale. The homogeneous erythroid cells can be used for further mechanism studies.