While the ability of stem cells to switch lineages has been suggested, the route(s) through which this may happen is unclear. To date, the best characterized adult stem cell population considered to possess transdifferentiation capacity is BM-MSCs (bone marrow mesenchymal stem cells). We investigated whether BM-MSCs that had terminally differentiated into the neural or epithelial lineage could be induced to transdifferentiate into the other phenotype in vitro. Our results reveal that neuronal phenotypic cells derived from adult rat bone marrow cells can be switched to epithelial phenotypic cells, or vice versa, by culture manipulation allowing the differentiated cells to go through, first, dedifferentiation and then redifferentiation to another phenotype. Direct transdifferentiation from differentiated neuronal or epithelial phenotype to the other differentiated phenotype cannot be observed even when appropriate culture conditions are provided. Thus, dedifferentiation appears to be a prerequisite for changing fate and differentiating into a different lineage from a differentiated cell population.