Stem cells transplantation holds great promise for the treatment of ischemic diseases through functional revascularization. Umbilical cord-derived mesenchymal stem cells (UC-MSCs) are also an ideal candidate for cell-based bioengineering. Herein, we report on the development of a simple and effective protocol to isolate UC-MSCs, and confirm their endothelial potential both in vitro and in vivo. UC-MSCs were isolated by a novel explantation technique and induced to differentiate into endothelial-like cells. Then UC-MSCs were transplanted into ischemic mouse model and cultured on 3D gel/MMT-CS composite scaffolds. Morphological and proliferation assessments show that sufficient UC-MSCs can be generated during a relatively short culture period with explantation technique. Increased expression of endothelial-specific markers (KDR and vWF), and functional markers (ac-LDL uptake and UEA-1 binding), indicate that functional endothelial progenitor cells are induced after 9 days of in vitro culture. In an ischemic hindlimb mouse model, the ratio of ischemic/nonischemic limb perfusion 4 weeks after MSCs transplantation reached 0.84 +/- 0.09. The capillary density of this group was 2.57-fold greater than that of sham-injected mice (P < 0.05). Immunofluorescence and immunohistological analyses indicate that MSCs may act to salvage the ischemic tissue by incorporating into the local vasculature. In vitro, UC-MSCs were observed to incorporate into 3D gel/MMT-CS composite scaffolds, to secrete extracellular matrix, to remain viable, and to retain their proliferation capacity. In conclusion, UC-MSCs isolated by novel yet simple explantation technique are well suited for application in the development of novel stem cell-based revascularization therapies.