ES cells are a potential source for insulin producing cells (IPCs). However, two major handicaps are establishing reliable differentiation protocols and the lack of imaging techniques that allow monitoring of these cells post-transplantation. Here, we describe a new approach for monitoring the in vitro differentiation and real-time, non-invasive imaging of ES cell-derived IPCs in vivo. ES cells were molecularly engineered so that the rat insulin promoter (RIP) driven luciferase (Luc) expression was specifically turned on and up regulated following their differentiation into IPCs. The rationale underlying this approach is that the transcriptional activation of RIP leads to Luc expression in IPCs providing an extremely sensitive reporter for monitoring the earliest differentiation events in real-time both in vitro and in vivo.