Cancer stem cells (CSCs) are capable of continuous proliferation and self-renewal and are proposed to play significant roles in oncogenesis, tumor growth, metastasis and cancer recurrence. CSCs are considered derived from normal stem cells affected by the tumor microenvironment although the mechanism of development is not clear yet. In 2007, Yamanaka's group succeeded in generating Nanog mouse induced pluripotent stem (miPS) cells, in which green fluorescent protein (GFP) has been inserted into the 5′-untranslated region of the Nanog gene. Usually, iPS cells, just like embryonic stem cells, are considered to be induced into progenitor cells, which differentiate into various normal phenotypes depending on the normal niche. We hypothesized that CSCs could be derived from Nanog miPS cells in the conditioned culture medium of cancer cell lines, which is a mimic of carcinoma microenvironment. As a result, the Nanog miPS cells treated with the conditioned medium of mouse Lewis lung carcinoma acquired characteristics of CSCs, in that they formed spheroids expressing GFP in suspension culture, and had a high tumorigenicity in Balb/c nude mice exhibiting angiogenesis in vivo. In addition, these iPS-derived CSCs had a capacity of self-renewal and expressed the marker genes, Nanog, Rex1, Eras, Esg1 and Cripto, associated with stem cell properties and an undifferentiated state. Thus we concluded that a model of CSCs was originally developed from miPS cells and proposed the conditioned culture medium of cancer cell lines might perform as niche for producing CSCs. The model of CSCs and the procedure of their establishment will help study the genetic alterations and the secreted factors in the tumor microenvironment which convert miPS cells to CSCs. Furthermore, the identification of potentially bona fide markers of CSCs, which will help the development of novel anti-cancer therapies, might be possible though the CSC model.