Human induced pluripotent stem cells (hIPSC) are a potential alternative to human embryonic stem cells (hESC). Similar to hESC, hIPSC lines can grow indefinitely in the laboratory while maintaining their intrinsic pluripotency properties. These pluripotent cells can be induced to differentiate in vitro to generate healthy progenitors and/or specialised somatic cell types that could potentially be used for transplantation and therapeutic applications. However, here we report that virally-derived hIPSC, and not hESC or hIPSC derived using episomal vectors, exhibit a propensity to revert to a pluripotent phenotype after differentiation. This hIPSC instability was revealed using our published method to identify pluripotent and cells undergoing very early-stage differentiation in standard human pluripotent stem cell cultures by fluorescence activated cell sorting (FACS), based on expression of the cell surface markers TG30 and GCTM-2. Comparative TG30/GCTM-2 FACS analysis showed strong similarities between subpopulations for both hIPSC and hESC lines. Similar to hESC, all the hIPSC lines showed the most pluripotent stem-like cell populations in the TG30Hi-GCTM-2Hi subfraction (P7), whereas the TG30Neg-GCTM-2Neg subfraction (P4) contained a very high proportion of differentiated cell types. However, differentiated P4 cells collected and cultured post-FACS from virally-derived hiPSC lines were unstable and re-acquired immunoreactivity to TG30 and GCTM-2, formed stem cell-like colonies and re-expressed pluripotency markers. Furthermore, differentiated cells from pluripotency-reverting hIPSC lines generated teratomas in our mouse experiments, raising concerns regarding the safety of these hIPSC lines. In contrast, differentiated cells from hESC and episomal-derived hIPSC did not show any of these abnormalities. We detected expression of the exogenous transcription factors used for the viral hIPSC generation, suggesting a causative link between transgene expression and the phenomenon of reversion to pluripotency. Our assays constitute a diagnostic kit to identify “unsafe” hIPSC lines, and provide potential approaches to eliminate the risk of teratoma formation prior to clinical applications.