Human embryonic stem cell (hESC) cultures are heterogeneous and constituting paracrine signals are required to maintain pluripotency. The cellular interplay and dynamic nature of this heterogeneity is not understood. Here, long-term hESC imaging and tracking revealed that hESC heterogeneity is dynamic and hESC self-renewal is dependent on colony-proximal distributions of paracrine signals. Tracking of hESCs forming colonies revealed that a biologically distinct cell type arises at the colony periphery in the absence of feeders. Higher rates of cell death occur in these hESC-derived cells, leading to clonal selection of colony reestablishing cells. hESC-derived feeders co-transferred during passaging promoted rapid colony recovery and expansion and reduced overall clonal selection of self-renewing hESCs. Our findings demonstrate that hESC-derived feeders arise from a distinct subpopulation of hESCs that respond to paracrine cues at the colony periphery that are required to sustain and establish clonal hESC self-renewal.