Homotypic and heterotypic cell-to-cell fusion are key processes during development and tissue regeneration. Nevertheless, aberrant cell fusion can contribute to tumour initiation and metastasis. Additionally, a form of cell-in-cell structure called entosis has been observed in several human tumours. Here we investigate cell-to-cell interaction between mouse mesenchymal stem cells (MSCs) and embryonic stem cells (ESCs). MSCs represent an important source of adult stem cells since they have great potential for regenerative medicine, even though they are also involved in cancer progression. We report that MSCs can either fuse forming heterokaryons, or be invaded by ESCs through entosis. While entosis-derived hybrids never share their genomes and induce degradation of the target cell, fusion-derived hybrids can convert into synkaryons. Importantly we show that hetero-to-synkaryon transition occurs through cell division and not by nuclear membrane fusion. Additionally, we also observe that the ROCK-actin/myosin pathway is required for both fusion and entosis in ESCs but only for entosis in MSCs. Overall, we show that MSCs can undergo fusion or entosis in culture by generating distinct functional cellular entities. These two processes are profoundly different and their outcomes should be considered given the beneficial or possible detrimental effects of MSC-based therapeutic applications.