The in vivo osteogenesis potential of mesenchymal-like cells derived from human embryonic stem cells (hESC-MCs) was evaluated in vivo by implantation on collagen/hydroxyapatite scaffolds into calvarial defects in immunodeficient mice. This study is novel because no osteogenic or chondrogenic differentiation protocols were applied to the cells prior to implantation. After 6 weeks, X-ray, microCT, and histological analysis showed that the hESC-MCs had consistently formed a highly vascularized new bone that bridged the bone defect and seamlessly integrated with host bone. The implanted hESC-MCs differentiated in situ to functional hypertrophic chondrocytes, osteoblasts, and osteocytes forming new bone tissue via an endochondral ossification pathway. Evidence for the direct participation of the human cells in bone morphogenesis was verified by two separate assays: with Alu and by human mitochondrial antigen positive staining in conjunction with co-localized expression of human bone sialoprotein in histologically verified regions of new bone. The large volume of new bone in a calvarial defect and the direct participation of the hESC-MCs far exceeds that of previous studies and that of the control adult hMSCs. This study represents a key step forward for bone tissue engineering because of the large volume, vascularity, and reproducibility of new bone formation and the discovery that it is advantageous to not over-commit these progenitor cells to a particular lineage prior to implantation. The hESC-MCs were able to recapitulate the mesenchymal developmental pathway and were able to repair the bone defect semi-autonomously without preimplantation differentiation to osteo- or chondroprogenitors.