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Background: Adipose-derived stem cells (ADSC) could be an appealing alternative to bone marrow stem cells (BMSC) for engineering cell-based osteoinductive grafts. Meanwhile, prior studies have demonstrated that melatonin can stimulate osteogenic differentiation. Therefore, we assayed and compared the melatonin effect on osteogenic differentiation of BMSC with that of ADSC. Methods: Mesenchymal stem cells (MSC) were isolated from the bone marrow and fat of adult rats. Both cell types were cultured in osteogenic medium in the absence and presence of melatonin at physiological concentrations (20-200 pg/ml). After 4 weeks, the expression of osteocalcin gene was analyzed by reverse transcription-PCR, alkaline phosphatase (ALP) activity was assayed and alizarin red S and von Kossa staining were done. Cell viability and apoptosis were also assayed by 3-(4, 5-Dimethylthiazol-2-yl)-2, 5-diphenyltetrazolium bromide, a tetrazole (MTT) and flow cytometry, respectively. Results: The osteoblastic differentiation of ADSC as demonstrated by ALP activity was less than that of BMSC. The amount of matrix mineralization has shown by alizarin red S and von Kossa staining also showed statistical differences between the two MSC. The incidence of apoptotic cells was higher among ADSC than BMSC. The flow cytometry proves that cell growth reduction is due to a decrease in the number of the cells entering the S phase of the cell cycle. MTT assay indicated that viable cells were fewer among ADSC than BMSC in control groups. Conclusion: The results of the study suggest that BMSC have greater osteogenic potential than ADSC and that melatonin promotes osteogenic differentiation to BMSC, but has a negative effect on ADSC osteogenic differentiation. Iran. Biomed. J. 12 (3): 133-141, 2008