An understanding of how mammalian stem cells produce specific neuronal subtypes remains elusive. Here we show that human embryonic stem cells generated early neuroectodermal cells, which organized into rosettes and expressed Pax6 but not Sox1, and then late neuroectodermal cells, which formed neural tube–like structures and expressed both Pax6 and Sox1. Only the early, but not the late, neuroectodermal cells were efficiently posteriorized by retinoic acid and, in the presence of sonic hedgehog, differentiated into spinal motoneurons. The in vitro–generated motoneurons expressed HB9, HoxC8, choline acetyltransferase and vesicular acetylcholine transporter, induced clustering of acetylcholine receptors in myotubes, and were electrophysiologically active. These findings indicate that retinoic acid action is required during neuroectoderm induction for motoneuron specification and suggest that stem cells have restricted capacity to generate region-specific projection neurons even at an early developmental stage.