Mesenchymal stem/stromal cells (MSCs) have been isolated from various tissues and utilized for an expanding number of therapies. The developmental pathways involved in producing MSCs and the phenotypic precursor/progenitor cells that give rise to human MSCs remain poorly defined. Human embryonic stem cells (hESCs) have the capability to generate functional hemato-endothelial cells and other mesoderm lineage cells. hESC-derived CD73(+) cells have been isolated and found to have similar phenotypic and functional characteristics as adult MSCs. Here we demonstrate hESC-derived CD34(+)CD73(-) cells can serve as MSC progenitor cells with the ability to differentiate into adipocytes, osteoblasts and chondrocytes. Additionally, gene array analysis of hESC-derived MSCs show substantially different gene expression compared to bone marrow (BM)-derived MSCs, especially with increased expression of pluripotent and multipotent stem cell and endothelial cell-associated genes. The isolation of functional MSCs from hESC-derived CD34(+)CD73(-) cells provides improved understanding of MSC development and utilization of pluripotent stem cells to produce MSCs suited for novel regenerative therapies.