It remains controversial whether human induced pluripotent stem cells (hiPSCs) are distinct from human embryonic stem cells (hESCs) in their molecular signatures and differentiation properties. We examined the gene expression and DNA methylation of 49 hiPSC and 10 hESC lines and identified no molecular signatures that distinguished hiPSCs from hESCs. Comparisons of the in vitro directed neural differentiation of 40 hiPSC and four hESC lines showed that most hiPSC clones were comparable to hESCs. However, in seven hiPSC clones, significant amount of undifferentiated cells persisted even after neural differentiation and resulted in teratoma formation when transplantated into mouse brains. These differentiation-defective hiPSC clones were marked by higher expression of several genes, including those expressed from long terminal repeats of human endogenous retroviruses. These data demonstrated that many hiPSC clones are indistinguishable from hESCs, while some defective hiPSC clones need to be eliminated prior to their application for regenerative medicine.