It has been demonstrated that the number and differentiating potential of bone marrow mesenchymal stem cells (MSCs) decrease with age. Therefore, the search for alternative sources of MSCs is of significant value. In the present study, MSCs were isolated from umbilical cord blood (UCB) by combining gradient density centrifugation with plastic adherence. Cultured cells were treated with ascorbate acid-2-phosphate, dexamethasone, β-glycerophosphate dexamethasone, insulin, 1-methyl-3-isobutylxamthine, indomethacin, β-mercaptoethanol, butylated hydroxyanisole, FGF-4 and HGF. Differentiating characterization of UCB-derived MSCs were detected by cytochemistry, immunocytochemistry, radioimmunoassay, RT-PCR and urea assay. The results showed UCB-derived MSCs could differentiate into osteoblasts, adipocytes and neuron-like cells. When MSCs were cultured with FGF-4 and HGF, approximately 63.6% of cells became small, round and epithelioid on day 28 by morphology. Compared with the control, levels of AFP in the supernatant liquid increased significantly from day 12 and were higher on day 28 (P < 0.01). Albumin increased significantly from day 16 (P < 0.01). Urea was first detected on day 20 (P < 0.01), and continued to increase on day 28 (P < 0.01). Cells first expressed CK-18 on day 16 through immunocytochemistry analysis. RT-PCR analysis showed that differentiated cells could express a number of hepatocyte-specific genes in a time-dependent manner. Glycogen storage was first seen on day 24. Our results suggest that UCB-derived MSCs can differentiate not only into osteoblasts, adipocytes and neuron-like cells, but also into hepatocytes. Human UCB-derived MSCs are a new source of cell types for cell transplantation and therapy.