Human embryonic stem cells (hESCs) provide a platform for studying human development and understanding mechanisms underlying diseases. Retinoblastoma-1 (RB1) is a key regulator of cell cycling, of which biallelic inactivation initiates retinoblastoma, the most common congenital intraocular malignancy. We developed a model to study the role of RB1 in early development and tumor formation by generating RB1-null hESCs using CRISPR/Cas9. RB1-/- hESCs initiated extremely large teratomas, with neural expansions similar to those of trilateral retinoblastoma tumors, in which retinoblastoma is accompanied by intracranial neural tumors. Teratoma analysis further revealed a role for the transcription factor ZEB1 in RB1-mediated ectoderm differentiation. Furthermore, RB1-/- cells displayed mitochondrial dysfunction similar to poorly differentiated retinoblastomas. Screening more than 100 chemotherapies revealed an RB1-/--specific cell sensitivity to carboplatin, exploiting their mitochondrial dysfunction. Together, our work provides a human pluripotent cell model for retinoblastoma and sheds light on developmental and tumorigenic roles of RB1.