Tumorigenic potential of human pluripotent stem cells (hPSCs) is an important issue in clinical applications. Despite many efforts, PSC-derived neural precursor cells (NPCs) have repeatedly induced tumors in animal models even though pluripotent cells were not detected. We found that polysialic acid-neural cell adhesion molecule (PSA-NCAM)− cells among the early NPCs caused tumors, whereas PSA-NCAM+ cells were nontumorigenic. Molecular profiling, global gene analysis, and multilineage differentiation of PSA-NCAM− cells confirm that they are multipotent neural crest stem cells (NCSCs) that could differentiate into both ectodermal and mesodermal lineages. Transplantation of PSA-NCAM− cells in a gradient manner mixed with PSA-NCAM+ cells proportionally increased mesodermal tumor formation and unwanted grafts such as PERIPHERIN+ cells or pigmented cells in the rat brain. Therefore, we suggest that NCSCs are a critical target for tumor prevention in hPSC-derived NPCs, and removal of PSA-NCAM− cells eliminates the tumorigenic potential originating from NCSCs after transplantation.