To determine the effects of extracellular matrix and neighboring cells on the differentiation of human embryonic stem cells (hESC) into progenitors of retinal cells and/or retinal pigment epithelium (RPE). HESC were cultured on mouse PA6 stromal cells for approximately 2 weeks to obtain neural progenitors. To induce photoreceptor marker expression, the neural progenitors were cultured on a confluent monolayer of ARPE19 or on laminin-coated dishes. To induce RPE markers, the neural progenitors were seeded onto human Bruch’s membrane or Matrigel. Cells were examined morphologically and stained with different RPE or neural progenitor markers. Microarray techniques were used to compare the gene expression profiles of hESC cultured on mouse fibroblasts or neural progenitors on PA6 cells to the transcriptome of the adult neural retina and RPE. HESC cultured on PA6 cells expressed neural progenitor markers β-tubulin III, PAX6, neural filament, GFAP and vimentin. Culturing these neural progenitors on confluent ARPE19 monolayer induced expression of the photoreceptor progenitor cell marker CRX; culturing neural progenitors on laminin substrates induced a neuronal phenotype with neurite formation. Neural progenitors expressed the RPE marker ZO-1 after culturing on Matrigel-coated dishes and the RPE marker Bestrophin after culturing on human Bruch's membrane explants. Hierarchical clustering analysis of samples suggested that when cultured on PA6 stromal cells hESC exhibited genetic characteristics towards differentiating into neural retina. Microarray analysis showed that after culturing on PA6 cells, stem cells expressed 117 new genes; among these there were 22 genes present in neural retina or RPE cells. The functions of these genes were highly related to cell proliferation, nervous system development and cell adhesion. HESC can be induced to differentiate into neural progenitors after culturing on PA6 cells. These neural progenitors can express RPE markers when cultured on Bruch's membrane or Matrigel, or photoreceptor markers when cultured on confluent ARPE19 or laminin. Additional studies are required to assess the function of hESC induced to express retinal or RPE markers prior to successful intraocular transplantation into animal models of retinal degeneration.