Human bone marrow-derived mesenchymal stem cells (MSCs) are a rare population of undifferentiated cells that have the capacity of self renewal and the ability to differentiate into mesodermal phenotypes, including osteocytes, chondrocytes, and adipocytes in vitro. Recently, MSCs have been shown to reside within the connective tissue of most organs, and their surface phenotype has been well analyzed. Many reports showed that transplanted MSCs enhanced regeneration as well as functional improvement of damaged organs and tissues. The wide differentiation plasticity of MSCs was expected to contribute to their demonstrated efficacy in a wide variety of experimental animal models and in human clinical trials. However, new findings suggest that the ability of MSCs to alter the tissue microenvironment via secretion of soluble factors may contribute more significantly than their capacity for differentiation in tissue repair. This review describes what is known about the cellular characteristics and differentiation potential of MSCs, which represent a promising stem cell population for further applications in regenerative medicine.