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The loss of cone photoreceptors that mediate daylight vision represents a leading cause of blindness, for which cell replacement by transplantation offers a promising treatment strategy. Here, we characterize cone differentiation in retinas derived from mouse embryonic stem cells (mESCs). Similar to in vivo development, a temporal pattern of progenitor marker expression is followed by the differentiation of early thyroid hormone receptor β2-positive precursors and, subsequently, photoreceptors exhibiting cone-specific phototransduction-related proteins. We establish that stage-specific inhibition of the Notch pathway increases cone cell differentiation, while retinoic acid signaling regulates cone maturation, comparable with their actions in vivo. MESC-derived cones can be isolated in large numbers and transplanted into adult mouse eyes, showing capacity to survive and mature in the subretinal space of Aipl1−/− mice, a model of end-stage retinal degeneration. Together, this work identifies a robust, renewable cell source for cone replacement by purified cell suspension transplantation.