Human induced pluripotent stem cells (hiPSC) have been shown to differentiate into a variety of replacement cell types. Detailed evaluation and comparison with their human embryonic stem cell (hESC) counterparts is critical for assessment of their therapeutic potential. Using established methods, we demonstrate here that hiPSCs are capable of generating hemangioblasts/blast cells (BCs), endothelial cells, and hematopoietic cells with phenotypic and morphologic characteristics similar to those derived from hESCs, but with a dramatic decreased efficiency. Furthermore, in distinct contrast with the hESC derivatives, functional differences were observed in BCs derived from hiPSCs, including significantly increased apoptosis, severely limited growth and expansion capability, and a substantially decreased hematopoietic colony-forming capability. After further differentiation into erythroid cells, >1,000-fold difference in expansion capability was observed in hiPSC-BCs versus hESC-BCs. Although endothelial cells derived from hiPSCs were capable of taking up acetylated low-density lipoprotein and forming capillary-vascular-like structures on Matrigel, these cells also demonstrated early cellular senescence (most of the endothelial cells senesced after one passage). Similarly, retinal pigmented epithelium cells derived from hiPSCs began senescing in the first passage. Before clinical application, it will be necessary to determine the cause and extent of such abnormalities and whether they also occur in hiPSCs generated using different reprogramming methods.