Human fetal liver is the major site of haematopoiesis throughout gestation but at around 12 - 13, weeks hepatogenesis becomes prominent. In the first trimester, the fetal liver contains a number of putative stem cell populations in microenvironmental niches. This study was designed to investigate these stem cell populations to determine the origins of hepatogenesis in fetal life and to determine the implications for hepatic regeneration in adults. Mesenchymal stem cells were isolated from fetal liver samples (fIMSC) on the basis of adherence to tissue culture plastic. The phenotype of the adherent population, using flow cytometry was determined as: CD29+ve, CD10S+ve, CD90+ve, CD73+ve, HLA ABC+ve, CD271-ve, CD4S-ve, CD34-ve, CD133-ve, CDllb-ve & HLA DR-ve. Differentiation of flMSC into osteogenic, adipogenic and chondrogenic lineages was also demonstrated as confirmation of the multipotential nature of these cells. Cells which were expanded clonally showed the same characteristics as the primary cell population. Thus, MSC isolated from human fetal liver conformed to criteria stipulated by International Society of Cellular Therapy (ISCT). flMSC were extensively passaged in vitro to relatively large passage numbers (P1S). It was observed that there was a reduction in expression of CD10S associated with a decrease in proliferative and differentiation properties of the cells. These findings appeared to be associated with chromosomal abnormalities and a shortening of telomere length over increasing passage number, which could be considered as a triggering of cell senescence. It was concluded that the early passage numbers of flMSC (P4-P8) are optimum for all studies and that CDi0S is a reliable and accessible surrogate marker for identification of senescent cells. flMSC were cultured in proprietary medium, supplemented with growth factors which are known to stimulate hepatogenesis. A greater degree of hepatogenesis from flMSC was observed when the medium was supplemented with oncostatin M (OSM), in comparison to culture in a medium supplemented with fibroblast growth factor (FGF) or hepatocyte growth factor (HGF). A hepatocyte-specific antibody and gene profiling were used to analyse the development of flMSC in these culture conditions. Hepatic cluster formation (indocyanine green positive) was noted within 3 days when flMSC cultured in the presence of FGF. Then after subsequent adding of OSM, cultured flMSC stained positively by flow cytometric analysis using an optimised hepatocyte-specific antibody and gene expression studies confirmed the presence of albumin, alpha-fetoprotein, factor VIII and tryptophan 2,3 dioxygenase in these cells. The cells acquired a polygonal morphology, similar to that of adult hepatocytes. The flMSC characterised in this study were shown to possess immunomodulatory activity: they do not induce aT-cell response and they have an immunosuppressive effect on T-cells in mixed Iymphocyte culture. flMSC differentiated to hepatocytes have the same immunological properties as undifferentiated fIMSC, despite expression of HLA DR when the cells are exposed to pro-inflammatory cytokines. This study shows that human fetal liver-derived MSC can develop into functional hepatocytes in vitro and that these end-stage cells have immunomodulatory properties. This de novo source of hepatic tissue could have therapeutic utility with potential for transplantation across HLA barriers.