Mesenchymal stem cell (MSC) based therapies have been proposed as an alternative or supplement to bone grafts to promote healing. Whereas somatic cells have been reprogrammed into embryonic stem (ES)-like cells and tissue specific progenitors by introducing defined transcription factors, lineage committed cells have not thus far been reprogrammed into MSCs. We have identified a growth factor, Pdgf-AB, which in combination with 5-Azacitidine, a demethylating agent, was able to reprogram terminally differentiated cells into functional MSC-like cells by synergistically activating both the Jak/Stat and Jnk/c-jun pathways. Reprogramed cells showed CFU-F activity, including serial clonogenicity and long-term self-renewal and multipotency for a range of functional mesodermal, endodermal and neuroectodermal cell types in vitro and in vivo. Freshly isolated osteocytes and osteoblasts from reporter transgenic mice when live imaged and tracked, lost lineage specific markers and acquired MSC markers when cultured in the presence of these factors. Reprogrammed CFU-Fs adopt transcriptional and epigenetic profiles comparable to those of MSCs and express markers of pluripotency albeit at levels significantly lower than in ES cells and do so by evicting nucleosomes and erasing DNA methylation at promoters that suppress these genes in lineage committed cells. These reprogrammed cells do not form teratomas but possess broad in vivo plasticity. Reprogrammed bone fragments contributed to in vivo repair of both bone and muscle and formed new blood vasculature in transplantation models of tissue injury. Taken together we conclude that terminally differentiated cells can be reprogrammed into MSCs using a defined set of two factors and is an effective way of reprogramming cells without using viral vectors and as such has immediate clinical relevance.