In attempts to produce mature oligodendrocytes from human embryonic stem (huES) cells, we searched conditions inducing transcription factors Olig1/2, as well as Nkx2.2 and Sox10, which are needed for maturation. This was obtained by retinoic acid treatment followed by noggin, an antagonist of bone morphogenetic proteins (BMPs). We found that retinoic acid induces BMPs in huES cells. Addition of noggin at a specific step was essential to form numerous mature oligodendrocytes with ramified branches and producing myelin basic protein (MBP). We describe a procedure converting huES cells into enriched populations of oligodendrocyte precursors that can be expanded and passaged repeatedly and subsequently differentiated into mature cells. Transplantation of such precursors showed that pretreatment by noggin markedly stimulates their capacity to myelinate in the brain of MBP-deficient shiverer mice in organotypic cultures and in living animals. Arrays of numerous long MBP+ fibers were generated over extended areas in the brain, with evidence of cell migration after transplantation and with formation of compact myelin sheaths.