Somatic cells can be reprogrammed into induced pluripotent stem (iPS) cells by enforced expression of transcription factors. Using serial live imaging of human fibroblasts undergoing reprogramming, we identified distinct colony types that morphologically resemble embryonic stem (ES) cells yet differ in molecular phenotype and differentiation potential. By analyzing expression of pluripotency markers, methylation at the OCT4 and NANOG promoters and differentiation into teratomas, we determined that only one colony type represents true iPS cells, whereas the others represent reprogramming intermediates. Proviral silencing and expression of TRA-1-60, DNMT3B and REX1 can be used to distinguish the fully reprogrammed state, whereas alkaline phosphatase, SSEA-4, GDF3, hTERT and NANOG are insufficient as markers. We also show that reprogramming using chemically defined medium favors formation of fully reprogrammed over partially reprogrammed colonies. Our data define molecular markers of the fully reprogrammed state and highlight the need for rigorous characterization and standardization of putative iPS cells.