Many diabetic patients could benefit from islet transplants; unfortunately there is a severe lack of transplantable tissue. Human embryonic stem cells (hESCs) are capable of self-renewing for an indefinite period of time and differentiating into any cell in the body and so could be a potential source of these much needed β-cells. Recently, protocols have been devised that push embryonic stem cells to a pancreatic fate following developmental pathways. However, in these cultures, there is no selection against cells that are still pluripotent. Our studies have shown that colony-forming neural stem cells, that give rise to only neural cells, can be directly derived from hESCs in minimal media conditions. Because pancreatic and neural cells share many similarities, we hypothesize that a pancreatic stem cell could be derived from hESCs directed towards a pancreatic fate in a manner similar to that used to derived neural stem cells. We differentiated hESCs using an established protocol which goes through definitive endoderm, primitive gut tube, early pancreas and endocrine precursor stages. At each stage hESCs were dissociated into single cells and plated at low density in the presence of FGF, EGF, B27 and ROCK inhibitor. We found that cells from all stages were capable of forming colonies in these conditions. Interestingly, the colonies from the early pancreas stage expressed high levels of the pancreatic marker PDX1 and Insulin compared to the other stages. Additionally, early pancreas colonies are capable of giving rise to glucose-responsive, insulin-secreting cells. Previous studies have shown that overexpression of Sox-17 is sufficient to induce definitive endoderm from hESCs. We used a tamoxifen-inducible Sox-17 overexpressing line of hESCs to study the role of Sox-17 in the differentiation of pancreatic stem cells from hESCs. While the activation of Sox-17 function inhibits colony formation from hESCs, it actually increases colony formation from early pancreas stage cells. This could reflect the role of Sox-17 in the early formation of pancreatic tissue. These data are consistent with the idea that pancreatic stem cells can be derived from hESCs using a method similar to one used in the derivation of neural stem cells.