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Abstract Current differentiation protocols for generating mesencephalic dopaminergic (mesDA) neurons from human pluripotent stem cells result in grafts containing only a small proportion of mesDA neurons when transplanted in vivo. In this study, we develop lineage-restricted undifferentiated stem cells (LR-USCs) from pluripotent stem cells, which enhances their potential for differentiating into caudal midbrain floor plate progenitors and mesDA neurons. Using a ventral midbrain protocol, 69% of LR-USCs become bona fide caudal midbrain floor plate progenitors, compared to only 25% of human embryonic stem cells (hESCs). Importantly, LR-USCs generate significantly more mesDA neurons under midbrain and hindbrain conditions in vitro and in vivo. We demonstrate that midbrain-patterned LR-USC progenitors transplanted into 6-hydroxydopamine-lesioned rats restore function in a clinically relevant non-pharmacological behavioral test, whereas midbrain-patterned hESC-derived progenitors do not. This strategy demonstrates how lineage restriction can prevent the development of undesirable lineages and enhance the conditions necessary for mesDA neuron generation.