Demyelination is a key component in the pathogenesis of many neurological disorders. Transplantation of myelinating cells may offer a therapeutic approach to restore neurological function in these diseases. Recent findings suggest that pluripotent embryonic stem (ES) cells can serve as an unlimited donor source for neural transplantation. The clinical application of ES cells for myelin repair will depend critically on the ability to enrich oligodendroglial progenitors in high purity. Combining controlled differentiation in the presence of growth factors and genetic lineage selection, we devised a cell culture protocol yielding highly purified oligodendrocyte progenitors. Murine ES cell clones stably transfected with a construct encoding the beta-galactosidase-neomycine phosphotransferase fusion protein (beta(geo)) under control of the 2'3'-cyclic nucleotide 3'-phosphodiesterase (CNP) promoter were differentiated into bipotential glial precursors. Subsequent induction of a CNP-positive stage and selection in neomycine resulted in a homogenous cell population with a pre-oligodendrocyte phenotype. The selected cells continued to proliferate in the presence of FGF-2 and PDGF and, upon growth factor withdrawal, differentiated into mature galactocerebroside (GalC)-positive oligodendrocytes. Transplantation studies in myelin-deficient (md) rats indicate that ES cell-derived oligodendrocyte progenitors generated with this method may serve as an attractive donor source for myelin repair.