Embryonic stem cells (ESCs) and mesenchymal stem cells (MSCs) have been studied for years as primary cell sources for regenerative biology and medicine. MSCs have been derived from cell and tissue sources, such as bone marrow (BM), and more recently from ESCs. This study investigated MSCs derived from BM, H1- and H9-ESC lines in terms of morphology, surface marker and growth factor receptor expression, proliferative capability, modulation of immune cell growth and multipotency, in order to evaluate ESC-MSCs as a cell source for potential regenerative applications. The results showed that ESC-MSCs exhibited spindle-shaped morphology similar to BM-MSCs but of various sizes, and flow cytometric immunophenotyping revealed expression of characteristic MSC surface markers on all tested cell lines except H9-derived MSCs. Differences in growth factor receptor expression were also shown between cell lines. In addition, ESC-MSCs showed greater capabilities for cell proliferation, and suppression of leukocyte growth compared to BM-MSCs. Using standard protocols, induction of ESC-MSC differentiation along the adipogenic, osteogenic, or chondrogenic lineages was less effective compared to that of BM-MSCs. By adding bone morphogenetic protein 7 (BMP7) into transforming growth factor beta 1 (TGFβ1)-supplemented induction medium, chondrogenesis of ESC-MSCs was significantly enhanced. Our findings suggest that ESC-MSCs and BM-MSCs show differences in their surface marker profiles and the capacities of proliferation, immunomodulation, and most importantly multi-lineage differentiation. Using modified chondrogenic medium with BMP7 and TGFβ1, H1-MSCs can be effectively induced as BM-MSCs for chondrogenesis.