Human mesenchymal stem cells (MSC) represent an attractive option for cell replacement strategies (tissue engineering, TE). TE applications require stability of a stem cell/biomaterial-hybrid via cell migration, matrix-remodelling and differentiation. We focus on these mechanisms in organotypic culture systems for bone TE using MSC from the umbilical cord (UC-MSC) and from bone marrow (BM-MSC). For the organotypic differentiation of MSC into functional osteoblasts, MSC were embedded in a collagenous matrix and subjected to osteogenic differentiation. Under these culture conditions, UC-MSC exceeded BM-MSC in the expression and synthesis of extracellular matrix (ECM) proteins, while BM-MSC show enhanced osteogenic gene upregulation. In both cell types the biosynthetic activity was accompanied by the ultrastructural appearance of hydroxyapatite/calcium crystals. Following secretion of matrix metalloproteinases, both MSC types migrated into and colonised the collagenous matrix causing matrix strengthening and contraction. In conclusion, MSC promise a broad therapeutical application for a variety of connective tissues requiring ECM synthesis and remodelling.