Bone marrow contains mesenchymal stem cells (MSCs) that can differentiate along multiple mesenchymal lineages. In this capacity they are thought to be important in the intrinsic turnover and repair of connective tissues while also serving as a basis for tissue engineering and regenerative medicine. However, little is known of the biological responses of human MSCs to inflammatory conditions. When cultured with IL-1β, marrow-derived MSCs from 8 of 10 human subjects deposited copious hydroxyapatite, in which authenticity was confirmed by Fourier transform infrared spectroscopy. Transmission electron microscopy revealed the production of fine needles of hydroxyapatite in conjunction with matrix vesicles. Alkaline phosphatase activity did not increase in response to inflammatory mediators, but PPi production fell, reflecting lower ectonucleotide pyrophosphatase activity in cells and matrix vesicles. Because PPi is the major physiological inhibitor of mineralization, its decline generated permissive conditions for hydroxyapatite formation. This is in contrast to MSCs treated with dexamethasone, where PPi levels did not fall and mineralization was fuelled by a large and rapid increase in alkaline phosphatase activity. Bone sialoprotein was the only osteoblast marker strongly induced by IL-1β; thus these cells do not become osteoblasts despite depositing abundant mineral. RT-PCR did not detect transcripts indicative of alternative mesenchymal lineages, including chondrocytes, myoblasts, adipocytes, ligament, tendon, or vascular smooth muscle cells. IL-1β phosphorylated multiple MAPKs and activated nuclear factor-κB (NF-κB). Certain inhibitors of MAPK and PI3K, but not NF-κB, prevented mineralization. The findings are of importance to soft tissue mineralization, tissue engineering, and regenerative medicine.