We show that pigment epithelium-derived factor (PEDF), which is secreted from primary or iPSC-derived retinal pigment epithelium (RPE), dramatically inhibits the growth of iPSCs. PEDF is detected abundantly in culture supernatants of primary or iPSC-derived RPE. Apoptotic cell death is induced in iPSC when co-cultured with RPE, a process that is significantly blocked by addition of antibody against PEDF. Indeed, addition of recombinant PEDF to the iPSC cell culture induces apoptotic cell death in iPSCs, but the expression of pluripotency related-genes is maintained, suggesting that PEDF causes cell death, not differentiation, of iPSCs. To recapitulate this event in vivo, we examined tumor formation in NOG mice after subcutaneous injection of iPSCs with or without an iPSC-derived RPE sheet (2.5 × 10(5) RPE cells). We observed that the tumor forming potential of iPSCs was significantly suppressed by simultaneous transplantation with an iPSC-derived RPE sheet.