Retinal stem cells (RSCs) are present within the pigmented ciliary epithelium (CE) of the adult human eye and produce progeny that differentiate in vitro into all neural retinal subtypes and retinal pigmented epithelium (RPE). We hypothesized that a RSC population, similar to the adult CE-derived RSC, is contained within pigmented colonies that arise in long-term cultures of human embryonic stem cells (hESCs) suggested to recapitulate retinal development in vitro. Single pigmented hESC-derived cells were isolated and plated in serum-free media containing growth factors and, after 2 weeks, clonal sphere colonies containing both pigmented and non-pigmented cells were observed. These colonies expressed the early retinal transcription factors Rx, Chx10 and Pax6, and could be dissociated and replated as single cells to form secondary clonal colonies. When allowed to differentiate, expression of markers for both RPE and neurons was observed. Rhodopsin expression was detected after explant co-culture and transplantation into the developing mouse eye as well as following treatment with soluble factors in vitro. We show that RSCs emerge in an in vitro model of retinal development and are a potential source of human photoreceptors for use in transplantation.