Human embryonic stem cells (hESCs) provide an important resource for novel regenerative medicine therapies and have been used to derive diverse cell populations, including hematopoietic and endothelial cells. However, it remains a challenge to achieve significant engraftment of hESC-derived blood cells when transplanted into animal models. To better understand mechanisms that enhance or limit the in vivo developmental potential of hESC-derived cells, we utilized hESCs that express firefly luciferase (luc) to allow noninvasive, real-time bioluminescent imaging of hESC-derived CD34(+) cells transplanted into the liver of neonatal immunodeficient mice. Serial imaging demonstrated stable engraftment and expansion of the luc(+) hESC-derived cells in vivo over several months. While we found that these hESC-derived CD34(+) cells have bipotential ability to generate both hematopoietic and endothelial lineages in vitro, these studies demonstrate preferential differentiation into endothelial cells in vivo, with only low levels of hematopoietic cell engraftment. Therefore, these studies reveal key differences in the developmental potential of hESC-derived cells using in vitro and in vivo analyses. Although transplanted hESC-derived CD34(+) cells are well-suited for revascularization therapies, additional measures are needed to provide higher levels of long-term hematopoietic engraftment.