Inducing organogenesis in 3D culture is an important aspect of stem cell research. Anterior neural structures have been produced from large embryonic stem cell (ESC) aggregates, but the steps involved in patterning such complex structures have been ill defined, as embryoid bodies typically contained many cell types. Here we show that single mouse ESCs directly embedded in Matrigel or defined synthetic matrices under neural induction conditions can clonally form neuroepithelial cysts containing a single lumen in 3D. Untreated cysts were uniformly dorsal and could be ventralized to floor plate (FP). Retinoic acid posteriorized cysts to cervical levels and induced localize FP formation yielding full patterning along the dorsal/ventral (DV) axis. Correct spatial organization of motor neurons, interneurons, and dorsal interneurons along the DV axis was observed. This system serves as a valuable tool for studying morphogen action in 3D and as a source of patterned spinal cord tissue.