The aim of this study was to investigate the osteogenic induction by tacrolimus hydrate (FK506) of rat bone marrow-derived mesenchymal stem cells (MSCs). MSCs were cultured in alpha-MEM containing either (1) L-ascorbic acid-2-phosphate (AsAP) and beta-glycerophosphate (beta-GP) as a control; (2) AsAP and beta-GP plus FK506; (3) AsAP and beta-GP plus Dex; or (4) AsAP and beta-GP plus FK506 and Dex. The concentration of FK506 was varied from 5 to 5000 nM to investigate the dose-effect relationship. Sixteen days later, cells were harvested for analysis. Examination of morphology, alkaline phosphatase (APase) activity, calcium deposition, bone nodule formation, osteocalcin mRNA expression, and mineralized extracellular matrix formation showed that the osteogenic differentiation of MSCs was greatly promoted, bone nodule formation was enhanced, APase activity and the expression of osteocalcin mRNA were increased. FK506 was much more effective when combined with Dex. The best results were achieved with alpha-MEM containing 0.25 mM AsAP, 10 mM beta-GP, 10 nM Dex, and 50 nM FK506. Formation of bone in vivo was also studied by transplanting MSCs-loaded ceramic cubes subcutaneously into the back of rats. Satisfactory results were achieved at 4 and 8 weeks. FK506 should be considered for use as an osteogenic agent.