Loss of photoreceptors is a common endpoint in degenerative retinal diseases. Human pluripotent stem cells provide a potential source for photoreceptor replacement, but, even in mouse models, the efficiency and efficacy of transplantation-based repair remains poor. In this study, we examined the degree to which immune rejection contributes to these disappointing outcomes using an immunodeficient IL2 receptor γ (IL2rγ)-null mouse model. Our results show that prevention of cell rejection in the normal and degenerating retinal environment significantly improves long-term survival and integration of hESC-derived donor retinal cells. Transplanted cells are able to differentiate into mature photoreceptors expressing various opsins and can functionally integrate into congenitally blind mice. Our work suggests that even though the retina is often considered immune-privileged, suppression of host immune-mediated cell rejection may well be a useful approach for improving long-term integration of transplanted cells with a view to successful clinical outcomes.