Stem cells are currently in the news for two reasons: the successful cultivation of human embryonic stem cell lines and reports that adult stem cells can differentiate into developmentally unrelated cell types, such as nerve cells into blood cells. Both intrinsic and extrinsic signals regulate stem cell fate and some of these signals have now been identified. Certain aspects of the stem cell microenvironment, or niche, are conserved between tissues, and this can be exploited in the application of stem cells to tissue replacement therapy.