In order to develop strategies to regenerate complex tissues in mammals, understanding the role of signaling in regeneration competent species and mammalian development is of critical importance. Fibroblast growth factor 8 (FGF-8) signaling has an essential role in limb morphogenesis and blastema outgrowth. Therefore, we aimed to study the effect of FGF-8b on the proliferation and differentiation of mesenchymal stem cells (MSCs), which have tremendous potential for therapeutic use of cell-based therapy. Rat adipose derived stem cells (ADSCs) and muscle progenitor cells (MPCs) were isolated and cultured in growth medium and various types of differentiation medium (osteogenic, chondrogenic, adipogenic, tenogenic, and myogenic medium) with or without FGF-8b supplementation. We found that FGF-8b induced robust proliferation regardless of culture medium. Genes related to limb development were upregulated in ADSCs by FGF-8b supplementation. Moreover, FGF-8b enhanced chondrogenic differentiation and suppressed adipogenic and tenogenic differentiation in ADSCs. Osteogenic differentiation was not affected by FGF-8b supplementation. FGF-8b was found to enhance myofiber formation in rat MPCs. Overall, this study provides foundational knowledge on the effect of FGF-8b in the proliferation and fate determination of MSCs and provides insight in its potential efficacy for musculoskeletal therapies.