Human bone marrow–derived mesenchymal stem cells (BM‐MSCs) are expected to be a potential source of cells for transplantation. Although recent reports have shown that isolated MSCs can differentiate into hepatocytes, the efficiency of differentiation is insufficient for therapeutic application. To circumvent this problem, it is necessary to understand the mechanisms of hepatic differentiation of human BM‐MSCs. Hepatocyte nuclear factor 3β (HNF3β), a forkhead/winged helix transcription factor, is essential for liver development. In the present study, we established a tetracycline (Tet)‐regulated expression system for HNF3β in UE7T‐13 BM‐MSCs. HNF3β expression significantly enhanced expression of albumin, α‐fetoprotein (AFP), tyrosine amino transferase (TAT) and epithelial cell adhesion molecule (EpCAM) genes. The differentiated cells showed hepatocyte‐specific functions including glycogen production and urea secretion. During treatment with the Tet‐on system for 8 days, over 80% of UE7T‐13 cells turned out to express albumin. Furthermore, the combination of Tet with basic fibroblast growth factor (bFGF) efficiently induced the genes such as albumin and TAT, which are associated with maturity of hepatocytes; however, it suppressed genes such as AFP and EpCAM, which are associated with immaturity of hepatocytes, suggesting that Tet‐induced HNF3β expression sensitizes BM‐MSCs to bFGF signals. Finally, the results of the present study suggest that down‐regulation of Wnt/β‐catenin signals caused by translocation of β‐catenin to cytoplasmic membrane is associated with hepatic differentiation of human BM‐MSCs. Conclusion: HNF3β expression induced efficient differentiation of UE7T‐13 human BM‐MSCs. (HEPATOLOGY 2008;48:597–606.)