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Embryonic stem (ES) cells are uniquely endowed with the capacity of self-renewal and the potential to give rise to all possible cell types. Their differentiation potential has raised hope that these cells could be used as a renewable source for cell transplantation in severe degenerative diseases. However, progress in this direction is still limited. Using two human embryonic stem (ES) cell lines, H1 and HSF-6, and three types of human fetal tissues—thymus, lung and pancreas—we investigated whether engrafted human fetal tissues in severe combined immunodeficient mice (SCID) mice could provide a physiologically-relevant microenvironment for human ES cells to differentiate into mature cells of corresponding tissues. Surprisingly, we observed an aggressive growth of tumors when human ES cells were injected into engrafted human fetal tissues in SCID mice. These tumors displayed histological characteristics of primitive, undifferentiated tumors rather than differentiated teratomas. Additionally, these tumors exhibited a normal karyotype and did not express the characteristic antigens of embryonic carcinomas. We also found differences among human fetal tissue types in their abilities to support the growth of these primitive tumors. Our study supports and validates a previously reported phenomenon in mouse that tumorigenesis of ES cells is host dependent. Our study is also the first report to demonstrate that human ES cells are prone to generate primitive, undifferentiated tumors in human fetal tissue grafts in SCID mice and raises a potential safety concern for using human ES cell-derived cell products in humans.