Summary. In postnatal life, mesenchymal stem cells (MSC) self-replicate, proliferate and differentiate into mesenchymal tissues, including bone, fat, tendon, muscle and bone marrow (BM) stroma. Possible clinical applications for MSC in stem cell transplantation have been proposed. We have evaluated the frequency, phenotype and differentiation potential of MSC in adult BM, cord blood (CB) and peripheral blood stem cell collections (PBSC). During culture, BM MSC proliferated to confluence in 10–14 d, maintaining a stable non-haemopoietic phenotype, HLA class-1+, CD29+, CD44+, CD90+, CD45–, CD34– and CD14 through subsequent passages. Using the colony forming unit fibroblasts assay, the estimated frequency of MSC in the BM nucleated cell population was 1 in 3·4 × 104 cells. Both adipogenic and osteogenic differentiation of BM MSC was demonstrated. In contrast, CB and PBSC mononuclear cells cultured in MSC conditions for two passages produced a population of adherent, non-confluent fibroblast-like cells with a haemopoietic phenotype, CD45+, CD14+, CD34–, CD44–, CD90– and CD29–. In paired experiments, cultured BM MSC and mature BM stroma were seeded with CB cells enriched for CD34+. Similar numbers of colony-forming units of granulocytes–macrophages were produced by MSC-based and standard stroma cultures over 10 weeks. We conclude that adult BM is a reliable source of functional cultured MSC, but CB and PBSC are not.