Umbilical cord-derived mesenchymal stem cells (UC-MSCs) are reported to have features intermediate between fetal and adult mesenchymal cells. Hence, UC-MSCs were cocultured with chondrocytes and Schwann cells to induce differentiation because of their flexible differentiation potential. US-MSCs were obtained from umbilical cords and cells at second passage were used in the experiments. Atelocollagen sponge was used as the scaffold for coculture; a horizontal, interactive coculture plate with a 0.6-μm pore size filter was placed between the connected vessels. US-MSCs were cocultured separately with chondrocytes and Schwann cells and culture alone served as a control. Five weeks after induction of differentiation, each specimen was evaluated histologically. In specimens cocultured with chondrocytes and the controls, cartilage tissues were detected using hematoxylin-eosin and toluidine blue staining. Cells positive for S100 protein were detected in the specimens cocultured with Schwann cells, but not in the controls. UC-MSCs were easily induced to differentiate into chondrocytes and neural cells by coculture. This indicates that continuously-shared humoral factors were effective in inducing differentiation of UC-MSCs. Coculture appears to be a potential technique for tissue regeneration using MSCs.