Objective: Human embryonic stem (hES) cells can be differentiated into pancreatic endoderm structures in vitro. The study was performed to determine whether induced pluripotent stem (iPS) cells can be differentiated into similar structures with comparable efficiency. Methods: We compared the ability of hES cells and iPS cells derived from human epidermal keratinocytes to progressively differentiate into pancreatic endoderm. Human foreskin keratinocytes were reprogrammed to pluripotency by transduction with retroviruses encoding Oct4, Sox2, and Klf4. The resulting keratinocyte-derived iPS (KiPS) cell lines and a hES cell line were subjected to a modified pancreatic endoderm differentiation protocol. Cells and embryoid-body structures derived from both hES and KiPS cells were compared at different stages of development for expression of stem cell and differentiation markers, including Sox2, Oct4, Mixl1, Brachyury, Gsc, FoxA2, Sox17, Hnf4α, Hnf1β, Nkx2.2, Nkx6.1, Hex, Isl1, Pdx1, and Slc2A, via Taqman real-time PCR, flow-cytometry, and/or immunocytochemistry. Results: hES cells and KiPS cells expressed similar levels of the stem cell factors Sox2 and Oct4. Upon differentiation, both cell types underwent remarkably similar changes in gene expression. They acquired the definitive endoderm markers Sox17 and FoxA2. Most Sox17+ and FoxA2+ cells co-expressed Hnf4α and Hnf1β, found in the primitive gut tube, a pancreas precursor. Most FoxA2+ cells were also Pdx1+, and many expressed Nkx2.2, Nkx6.1, and Isl1. Conclusion: Keratinocyte- derived iPS cells can be differentiated into pancreatic endoderm, and the efficiency of this process is comparable to that seen for hES cells. Thus keratinocytes have the potential to serve as a source of patient-specific pancreatic endoderm for transplantation.