Stem cell therapy may be used potentially to treat retinal degeneration and restore vision. Since embryonic stem cells (ESCs) can differentiate into almost any cell types, including those found in the eye, they can be transplanted to repair or replace damaged or injured retinal tissue resulting from inherited diseases or traumas. In this investigation, we explored the potential of ESCs and ESC-derived neuroprogenitors to proliferate and integrate into the diseased retinal tissue of rd12 mice. These rd12 mice mimic the slow and progressive retinal degeneration seen in humans. Both ESCs and ESC-derived neuroprogenitors from ESCs survived and proliferated as evidenced from an increase in yellow fluorescent protein fluorescence. Quantification analysis of cryosectioned retinal tissue initially revealed that both ESCs and neuroprogenitors differentiated into cells expressing neural markers. However, ESC proliferation was robust and resulted in the disruption of the retinal structure and the eventual formation of teratomas beyond 6 weeks postimplantation. In contrast, the neuroprogenitors proliferated slowly, but differentiated further and integrated into the retinal layers of the eye. The differentiation of neuroprogenitors represented various retinal cell types, as judged from the expression of cell-specific markers including Nestin, Olig1, and glial fibrillary acidic protein. These results suggest that ESC-derived neuroprogenitors can survive, proliferate, and differentiate when implanted into the eyes of experimental mice and may be used potentially as cell therapy for treating degenerated or damaged retinal tissue.