Bone marrow-derived mesenchymal stem cells (MSCs) are precursors of bone, cartilage and fat tissue. MSC can also regulate the immune response. For these properties, they are tested in clinical trials for tissue repair in combination with bioscaffolds or injected as cell suspension for immunosuppressant therapy. Experimental data, however, indicate that MSC can undergo or induce a tumorigenic process in determined circumstances. We used a modified model of ectopic bone formation in mice by subcutaneously implanting porous ceramic seeded with murine MSC. In this new model, host-derived sarcomas developed when we implanted MSC/bioscaffold constructs into syngeneic and immunodeficient recipients, but not in allogeneic hosts or when MSCs were injected as cell suspensions. The bioscaffold provided a tridimensional support for MSC to aggregate, thus producing the stimulus for triggering the process eventually leading to the transformation of surrounding cells and creating a surrogate tumor stroma. The chemical and physical characteristics of the bioscaffold did not affect tumor formation; sarcomas developed either when a stiff porous ceramic was used or when the scaffold was a smooth collagen sponge. The immunoregulatory function of MSC contributed to tumor development. Implanted MSC expanded clones of CD4+CD25+ T regulatory lymphocytes that suppressed host’s antitumor immune response.