This protocol describes an efficient technique for generation of functional erythroid cells from hESCs, under conditions suitable for scale-up. The resulting cells possess oxygen-transporting capacities comparable with normal red blood cells (RBCs) and respond to changes in pH and in 2,3-diphosphoglycerate concentrations. The resulting cells also undergo progressively shrink in size, and exhibit chromatin condensation, and extrusion of the pycnotic nucleus to form enucleated erythrocytes with a diameter similar to that of normal RBCs.