Mesenchymal stem cells (MSCs) were isolated by gradient density centrifugation from umbilical cord blood. Spindle-shaped adherent cells were permitted to grow to 70% confluence in primary culture media which was reached by day 12. Induction of differentiation started by culturing cells with differentiation medium containing FGF-4 and HGF. Under hepatogenic conditions few cuboidal cells appeared in culture on day 7. From day 21 to day 28, most of cells became small and round. The control negative cells cultured in serum free media showed fibroblast-like morphology. Urea production and protein secretion by the differentiated hepatocyte-like cells were detected on day 21 and increased on day 28. Protein was significantly increased in comparison with control by day 28. The cells became positive for AFP at day 7 and positive cells could still be detected at days 21 and 28. The cells in the control group were stained negative for AFP. The cells expressed albumin gene at the 14th day that became markedly increased at the 28th day of culture with HGF and FGF-4. No albumin expression was observed in the 7th day sample and the control. This study demonstrated that UCB-derived MSCs had the ability to differentiate into functioning hepatocyte-like cells starting from the 7th day after culturing under hepatogenic conditions and became well functioning at days 21 and 28. These data indicated that UCB-derived MSCs can be a promising source of cell therapy for intractable liver diseases.Keywords: Umbilical cord blood; Mesenchymal stem cells; Culture; Hepatocytes; HGF; FGF-