The differentiation potential of adult stem cells has long been believed to be limited to the tissue or germ layer of their origin. However, recent studies have demonstrated that adult stem cells may encompass a greater potential than once thought. In the present study, we examined whether murine bone marrow derived stromal stem cells (BMSSCs) are able to differentiate into functional hepatocytes in vitro. BMSSCs were isolated from murine femora and tibiae, and the mesodermal multilineage differentiation potentials of these cells were functionally characterized. To effectively induce hepatic differentiation, we designed a novel protocol by using hepatocyte-conditioned medium. Hepatic differentiation from mouse BMSSCs was examined by a variety of assays at morphological and molecular levels. Morphologically, mouse BMSSCs became round and epithelioid, binucleated after induction. Differentiated cells were harvested on Days 0, 10, and 20 and subjected to examination of hepatocyte characteristics by reverse transcription-polymerase chain reaction (RT-PCR) and immunocytochemistry. We detected AFP, HNF-3β, CK19, CK18, ALB, TAT, and G-6-Pase at the mRNA and/or protein levels, hepatocyte-like cells by culture in conditioned medium further demonstrated in vitro functions characteristic of liver cells, including glycogen storage, and urea secretion. Moreover, transplantation of the differentiated cells into liver-injured mice partially restored serum albumin level and significantly suppressed transaminase activity. Our findings indicated the transdifferentiation potential of mouse BMSSCs developing into the functional hepatocyte-like cells by conditioned culture medium and, hence, may serve as a model system for the study of mechanisms involved in the transdifferentiation, and a cell source for cell therapy of hepatic diseases. J. Cell. Biochem. J. Cell. Biochem. 102: 52–63, 2007. © 2007 Wiley-Liss, Inc.