An increasing body of data suggest that mesenchymal stem cells (MSCs) reside in a perivascular niche. To more closely mimic this in vivo microenvironment and for better understanding of its complexity, and the factors that regulate the MSC activity, human umbilical vein endothelial cells (HUVECs) were co-cultured with human bone marrow MSCs--using a novel three-dimensional (3D) spheroid co-culture system. Using confocal microscopy of fluorescently labelled cells, we observed HUVECs and MSCs to self-assemble and form organised structures with segregated cell-type partitioning. Under osteogenic conditions, the rate and extent of differentiation in MSC/HUVEC spheroids was significantly elevated compared to 3D co-cultures of MSCs and human dermal fibroblast controls as shown by alkaline phosphatase staining. Conversely, HUVECs inhibited adipogenic differentiation and the proliferation of MSCs in 3D co-cultures indicating that HUVECs suppressed MSC cycling and selectively promoted osteogenic differentiation in 3D. We have also shown that HUVECs enhanced activation of endogenous Wnt signalling and bone morphogenetic protein (BMP) signalling as shown by increased levels of active nuclear β-catenin and pSmad 1/5/8 immunopositivity respectively. These data suggest strongly that endothelial cells regulate the MSC activity in simulated in vivo conditions, by maintaining quiescence and facilitating niche exit via osteogenic differentiation following appropriate cues. Our findings also underline the importance of 3D heterotypic cell-cell interactions in the regulation of MSC behaviour, suggesting that multicellular cocktails and/or 3D-based delivery strategies may be beneficial for bone repair.