Tendon-like tissue generated from stem cells in vitro has the potential to replace tendons and ligaments lost through injury and disease. However, thus far, no information has been available on the mechanism of tendon formation in vitro and how to accelerate the process. We show here that human mesenchymal stem cells (MSCs) and bone marrow-derived mononuclear cells (BM-MNCs) can generate tendon-like tissue in 7. days mediated by transforming growth factor (TGF) β3. MSCs cultured in fixed-length fibrin gels spontaneously synthesized narrow-diameter collagen fibrils and exhibited fibripositors (actin-rich, collagen fibril-containing plasma membrane protrusions) identical to those that occur in embryonic tendon. In contrast, BM-MNCs did not synthesize tendon-like tissue under these conditions. We performed real-time PCR analysis of MSCs and BM-MNCs. MSCs upregulated genes encoding type I collagen, TGFβ3, and Smad2 at the time of maximum contraction of the tendon-like tissue (7. days). Western blot analysis showed phosphorylation of Smad2 at maximum contraction. The TGFβ inhibitor SB-431542, blocked the phosphorylation of Smad2 and stopped the formation of tendon-like tissue. Quantitative PCR showed that BM-MNCs expressed very low levels of TGFβ3 compared to MSCs. Therefore we added exogenous TGFβ3 protein to BM-MNCs in fibrin gels, which resulted in phosphorylation of Smad2, synthesis of collagen fibrils, the appearance of fibripositors at the plasma membrane, and the formation of tendon-like tissue. In conclusion, MSCs that self-generate TGFβ signaling or the addition of TGFβ3 protein to BM-MNCs in fixed-length fibrin gels spontaneously make embryonic tendon-like tissue in vitro within 7. days. © 2010 International Society of Matrix Biology.