Retinal and macular degenerations are a major cause of blindness. Cell transplantation is a possible therapeutic approach for the replacement of degenerating retinal cells. Here, we studied the potential of human embryonic stem cells (hESCs) to survive, integrate, and differentiate into retinal cells after intraocular transplantation. Highly enriched cultures of neural precursors (NPs) expressing transcripts of key regulatory genes of retinal development were developed from the hESCs. After spontaneous differentiation in vitro, the NPs gave rise to progeny expressing markers of retinal progenitors and photoreceptor development, though this was uncommon and cells expressing markers of mature photoreceptors were not observed. After transplantation into rat eyes, the NPs survived for 16 weeks, migrated large distances, and integrated in the host retina. Teratoma tumors were not observed. Human cells expressing rhodopsin, blue cone opsin, and neural retina leucine zipper transcription factor were observed in subretinal grafts, but not within vitreal and inner retinal grafts. The results suggest that hESCs have the potential to differentiate into retinal cells and that the subretinal microenvironment supports their differentiation toward a photoreceptor fate. This may be the first step toward further developments that eventually may allow the use of hESCs for transplantation in retinal degenerations.