Synovial sarcoma (SS) is a malignant soft tissue tumor characterized by its unique t(X;18)(p11;q11) chromosomal translocation leading to the formation of the SS18-SSX fusion gene. The resulting fusion protein product is considered to play as an aberrant transcription factor and transform target cells by perturbing their gene expression program. However, the cellular origin of SS is highly debated. We herein established two novel human SS cell lines, named Yamato-SS and Aska-SS, and investigated their biological properties. We found the self-renewal ability of these cells to generate sarcospheres, to form tumors in serial xenotransplantation and reconstitute the tumor phenotypes without fractionation by any surface markers. Both SS cells as well as clinical tissue specimens from 15 patients expressed the marker genes-associated stem cell identity, Oct3/4, Nanog, and Sox2. We also found that both SS cells displayed limited differentiation potentials for mesenchymal lineages into osteocytes and chondrocytes albeit with the expression of early mesenchymal and hematopoietic lineage genes. Upon SS18-SSX silencing with sequence-specific siRNAs, these SS cells exhibited morphological transition from spherical growth in suspension to adherent growth in monolayer, additional expression of later mesenchymal and hematopoietic lineage genes, and broader differentiation potentials into osteocytes, chondrocytes, adipocytes, and macrophages in appropriate differentiation cocktails. Collectively, these data suggest that a human multipotent mesenchymal stem cell can serve as a cell of origin for SS and SS is a stem cell malignancy resulting from dysregulation of self-renewal and differentiation capacities driven by SS18-SSX fusion protein.