The low percentage of human mesenchymal stem cells (hMSCs) in bone marrow necessitates their in vitro expansion prior to clinical use in regenerative medicine. We evaluated the effect of long-term culture of hMSCs on telomere length and transformation capacity by TERT transfection. hMSCs were isolated from the bone marrow aspirates of 24 donors and cultured with fibroblast growth factor-2 (FGF-2). Six cell lines with >500 population doubling levels were considered immortalized. TERT was transfected into two of the six lines for a comparison of telomere length, telomerase activity, differential capacity, colony formation capacity in soft agar and tumorigenicity in immunodeficient (NOD-SCID) mice. hMSC lines exhibited elongated telomeres without the activation of telomerase and retained multi-lineage differentiation potential upon chondrogenic or adipogenic differentiation, while non-immortalized hMSCs showed a marked reduction in telomere length in the differentiation process. Immortalized hMSCs showed anchorage-independence and formed tumors in NOD-SCID mice. Histologically, these tumors consisted of differentiated cells such as fat tissue and cartilage. Two TERT-transfected hMSC lines showed high rates of tumor formation in NOD-SCID mice. These tumors were histologically similar to teratocarcinoma without differentiated cells. These cells may provide a model for the origin of cancer stem cells from adult stem cells, and indicate the possibility that telomerase activation has a major role in the malignant transformation of human stem cells. These data suggest that adult hMSCs have a potential for neoplastic transformation and have implications for the use of hMSCs in tissue engineering and regenerative medicine.