Mesenchymal stem cells (MSCs) have the capabilities for self-renewal and differentiation into cells with the phenotypes of bone, cartilage, neurons and fat cells. These features of MSCs have attracted the attention of investigators for using MSCs for cell-based therapies to treat several human diseases. Because bone marrowderived cells, which are a main source of MSCs, are not always acceptable due to a significant drop in their cell number and proliferative/differentiation capacity with age, human umbilical cord blood (UCB) cells are good substitutes for BMCs due to the immaturity of newborn cells. Although the isolation of hematopoietic stem cells from UCB has been well established, the isolation and characterization of MSCs from UCB still need to be established and evaluated. In this study, we isolated and characterized MSCs. UCB-derived mononuclear cells, which gave rise to adherent cells, exhibited either an osteoclast or a mesenchymal-like phenotype. The attached cells with mesenchymal phenotypes displayed fibroblast-like morphologies, and they expressed mesenchymal-related antigens (SH2 and vimentin) and periodic acid Schiff activity. Also, UCB-derived MSCs were able to transdifferentiate into bone and 2 types of neuronal cells, in vitro. Therefore, it is suggested that the MSCs from UCB might be a good alternative to bone marrow cells for transplantation or cell therapy.