Our goal has been to improve the microenvironment where human embryonic stem cells (hESC) differentiate in order to generate functional hematopoietic stem/progenitor cells (HS/PC) in culture, with the ultimate goal to use these HS/PCs for the treatment of leukemias and other blood diseases. We have optimized a two step differentiation protocol that combines embryoid body differentiation and subsequent stroma co-culture to generate HS/PCs that exhibit the same phenotype as HSCs obtained from human hematopoietic tissues (CD34+CD38-CD90+CD45+). However, our findings indicate that the hESC derived HS/PCs have restricted developmental potential as compared to fetal liver or cord blood derived HS/PCs, and they senesce prematurely in culture, and are unable to generate B-cells . Our functional and molecular studies suggest that hES-derived HS/PCs resemble closely lineage-restricted progenitors found early in development in human hematopoietic tissues. Our recent studies have focused on exploring the possibility that another precursor that develops in the embryoid bodies could have lymphoid potential when placed in an appropriate microenvironment. Our preliminary data suggests that development of T-lymphocytes from hESCs in vitro may be feasible. Our future work will continue to focus on generating fully functional HSCs by improving the in vitro microenvironment where HS/PCs develop, and/or programming HSC transcriptional program using inducible lentiviral vectors.