Methods to induce the in vitro differentiation of embryonic stem (ES) cells into retinal progenitors, retinal pigment epithelium (RPE) cells and photoreceptors (PRCs) have recently been established. However, the need for recombinant proteins or other biological molecules to differentiate these cells has limited their therapeutic potential. On page 3169, Fumitaka Osakada, Masayo Takahashi and colleagues report a new method for differentiating retinal cells from ES cells. Previous findings showed that disrupting the Wnt and Nodal signalling pathways promotes the differentiation of ES cells into retinal progenitors; here, the authors use the small-molecule inhibitors CKI-7 and SB-431542, respectively, to block these two pathways. They show that human ES cells treated with these inhibitors differentiate into retinal progenitors; retinal specification is indicated by the loss of the ES-cell markers Nanog and Oct3/4 and an increase in retinal progenitor markers. Importantly, retinal progenitors can also be differentiated from human induced pluripotent stem (iPS) cells with combined CKI-7 and SB-431542 treatment. Finally, they show that both ES-cell- and iPS-cell-derived retinal progenitors can differentiate into RPE cells, and into PRCs that can respond to light. These data represent a step forward in cellular therapy approaches to treat currently incurable retinal degenerative diseases.