The therapeutic use of stem cells to treat diseases and injuries is a promising tool in regenerative medicine. The umbilical cord provides a rich source of stem cells; we have previously reported a population of stem cells isolated from Wharton's jelly. In this report, we aimed to isolate a novel cell population that was different than those found in Wharton's jelly. We isolated stem cells from the subepithelial layer of the umbilical cord; the cells could be expanded for greater than 90 population doubling and had mesenchymal stem cell characteristics, expressing CD9, SSEA4, CD44, CD90, CD166, CD73, and CD146 but were negative for STRO-1. The cells can be directionally differentiated and undergo osteo-, chondro-, adipo-, and cardiogenesis. In addition, we have identified for the first time that mesenchymal stem cells isolated from umbilical cord can produce microvesicles, termed exosomes. This is the first report describing a stem cell population isolated from the subepithelial layer of the umbilical cord. Given the growth capacity, multilineage potential, and most importantly the low levels of HLA-ABC, we propose that this novel cell isolated from the subepithelial layer of umbilical cord is an ideal candidate for allogeneic cell-based therapy.