Transplantation of retinal cells has recently provided a promising therapeutic approach for retinal degeneration. Here, we differentiated initially retinal progenitors (RPs) from adherent feeder-free human embryonic stem cells (hESCs) with the use of defined media supplemented with a specific combination of growth factors. The differentiated RPs highly (>80%) expressed related molecular features that included Six3 at an early stage in addition to Crx, Rx, Pax6, Otx2, and Chx10 at later stage. Next, we examined the induction of photoreceptors by Shh and/or the coculture of rabbit retinal pigmented epithelium with hESCs-derived RPs. The differentiation of retinal cells was demonstrated by protein and gene expression in all groups. However, S-Opsin, a cone photoreceptor marker, had higher expression in the presence of Shh, whereas expressions of Gli and Hes1 decreased in the same group. Finally, hESC-derived RPs were treated with Shh transplanted into the subretinal space of sodium iodate-injected albino-type adult rabbits and analyzed 4 weeks later. Transplanted retinal cells survived, migrated into retinal layers, and restored a small but significant B-wave. The grafted cells expressed photoreceptor markers, S-Opsin and Rhodopsin. Our results indicate that putative hESC-derived retinal cells express related genes and proteins. Further, our results show that retinal-like cells can be useful replacements for photoreceptors in retinal diseases.