Embryonic stem (ES) cells from many organisms have the capacity to generate in vitro a wide variety of cell types depending on their environment. Understanding precisely how such toti- or pluripotent cells may be driven towards a specific lineage represents a major challenge if our ambition of using ES cells to generate a ready supply of healthy cells for cell-based therapies for a range of diseases is to be realized. Recent advances have demonstrated that melanocytes and retinal pigmented epithelial (RPE) cells exhibiting the characteristics of their natural counterparts can be induced from undifferentiated ES cells grown on monolayers of specific stromal cell lines or by using a combination of Wnt3a, Endothelin-3 and SCF. The ability to induce pigment cells from ES cells promises to facilitate our understanding of the precise molecular mechanisms underlying this process and moreover enable us to distinguish the program of gene expression that underpins the choice made between generating a nerual crest-type melanocyte versus an RPE cell. Moreover, once the combination of signals required to induce a particular type of pigment cell are characterized, the way may be open for future cell-based therapy for various diseases caused by defective pigment cells.