The clinical use of human pluripotent stem cells and their derivatives is limited by the rejection of transplanted cells due to differences in their human leukocyte antigen (HLA) genes. This has led to the proposed use of histocompatible, patient-specific stem cells; however, the preparation of many different stem cell lines for clinical use is a daunting task. Here, we develop two distinct genetic engineering approaches that address this problem. First, we use a combination of gene targeting and mitotic recombination to derive HLA-homozygous embryonic stem cell (ESC) subclones from an HLA-heterozygous parental line. A small bank of HLA-homozygous stem cells with common haplotypes would match a significant proportion of the population. Second, we derive HLA class I-negative cells by targeted disruption of both alleles of the Beta-2 Microglobulin (B2M) gene in ESCs. Mixed leukocyte reactions and peptide-specific HLA-restricted CD8(+) T cell responses were reduced in class I-negative cells that had undergone differentiation in embryoid bodies. These B2M(-/-) ESCs could act as universal donor cells in applications where the transplanted cells do not express HLA class II genes. Both approaches used adeno-associated virus (AAV) vectors for efficient gene targeting in the absence of potentially genotoxic nucleases, and produced pluripotent, transgene-free cell lines.