Although stem cell therapy holds promise as a potential treatment in a number of diseases, the tumorigenicity of embryonic stem cells (ESC) and induced pluripotent stem cells remains a major obstacle. <i>In vitro</i> predifferentiation of ESCs can help prevent the risk of teratoma formation, yet proliferating neural progenitors can generate tumors, especially in the presence of immunosuppressive therapy. In this study, we investigated the effects of the microenvironment on stem cell growth and teratoma development using undifferentiated ESCs. Syngeneic ESC transplantation triggered an inflammatory response that involved the recruitment of bone marrow (BM)derived macrophages. These macrophages differentiated into an M2 or angiogenic phenotype that expressed multiple angiogenic growth factors and proteinases, such as macrophage migration inhibitory factor (MIF), VEGF, and matrix metalloproteinase 9