This study examined whether mesenchymal stem cells (MSCs), which are stem cells originated from embryonic mesoderm, are able to differentiate into functional hepatocyte-like cells in vitro. MSCs were isolated from human bone marrow and umbilical cord blood, and the surface phenotype and the mesodermal multilineage differentiation potentials of these cells were characterized and tested. To effectively induce hepatic differentiation, we designed a novel 2-step protocol with the use of hepatocyte growth factor and oncostatin M. After 4 weeks of induction, cuboidal morphology, which is characteristic of hepatocytes, was observed, and cells also expressed marker genes specific of liver cells in a time-dependent manner. Differentiated cells further demonstrated in vitro functions characteristic of liver cells, including albumin production, glycogen storage, urea secretion, uptake of low-density lipoprotein, and phenobarbital-inducible cytochrome P450 activity. In conclusion, human MSCs from different sources are able to differentiate into functional hepatocyte-like cells and, hence, may serve as a cell source for tissue engineering and cell therapy of hepatic tissues. Furthermore, the broad differentiation potential of MSCs indicates that a revision of the definition may be required.