Aims/hypothesis To overcome the donor shortage in the treatment of advanced type 1 diabetes by islet transplantation, human embryonic stem cells (hESCs) show great potential as an unlimited alternative source of beta cells. hESCs may have immune privileged properties and it is important to determine whether these properties are preserved in hESC-derived cells. Methods We comprehensively investigated interactions of both innate and adaptive auto-and allo-immunity with hESC-derived pancreatic progenitor cells and hESC-derived endocrine cells, retrieved after in-vivo differentiation in capsules in the subcutis of mice. Results We found that hESC-derived pancreatic endodermal cells expressed relatively low levels of HLA endorsing protection from specific immune responses. HLA was upregulated when exposed to IFNγ, making these endocrine progenitor cells vulnerable to cytotoxic T cells and alloreactive antibodies. In vivo-differentiated endocrine cells were protected from complement, but expressed more HLA and were targets for alloreactive antibody-dependent cellular cytotoxicity and alloreactive cytotoxic T cells. After HLA compatibility was provided by transduction with HLA-A2, preproinsulin-specific T cells killed insulin-producing cells. Conclusions/interpretation hESC-derived pancreatic progenitors are hypoimmunogenic, while in vivo-differentiated endocrine cells represent mature targets for adaptive immune responses. Our data support the need for immune intervention in transplantation of hESC-derived pancreatic progenitors. Cell-impermeable macro-encapsulation may suffice.