Umbilical cord blood (UCB) is well known to be a rich source of stem cells especially for haematopoietic stem cells (HSCs). Recently, mesenchymal stem cells (MSCs) have also been shown to exist in cord blood. Although MSCs have been described by a subset of surface antigens after expansion, little is known about the cell surface phenotype of undifferentiated MSCs. The aim of this study therefore was to clarify whether undifferentiated MSCs are resident among CD34(-) UCB cells. CD34(+) cells were separated from UCB mononuclear cells (MNCs) by magnetic sorting and the CD34(-) cell fractions were cultured in Dulbecco's modified Eagle's medium (DMEM) with 10% foetal calf serum (FCS) and basic-fibroblast growth factor. Isolated CD34(+) cells were also cultured in the same medium. Adherent fibroblast-like cells at passage 3-4 were analyzed by fluorescence-activated cell sorting (FACS) for MSC marker expression , and standard adipogenic, osteogenic and chondrogenic assays were used to investigate their differentiation potentials. After 4-5 weeks in culture, the cells from the CD34(-) fraction became confluent with flat and fibroblast-like morphology. These cells were positively stained for the mesenchymal cell markers CD29, CD73 and CD105. In adipogenic differentiation, the cells showed oil red O positive and expressed FABP4, adipsin and proliferation-activated receptor gamma-2 (PPARgamma2 genes) associated with adipogenesis. In osteogenic differentiation, calcium accumulation and osteocalcin were detected. The cells grown in chondrogenic conditions were positively stained for human aggrecan and expressed collagen type II and Sox-9 genes. In contrast, cells from the CD34(+) fraction failed to generate any cells with MSC morphology under the same culture conditions. Our results showed that UCB contained MSCs which are only resident in the CD34(-) fraction. The MSCs could be induced to differentiate into at least three lineage cell types, adipocytes, osteoblasts and chondrocytes.