The direct conversion of skin cells into somatic stem cells has opened new therapeutic possibilities in regenerative medicine. Here, we show that human induced mesenchymal stem cells (iMSCs) can be efficiently generated from cord blood (CB)- or adult peripheral blood (PB)-CD34(+) cells by direct reprogramming with a single factor, OCT4. In the presence of a GSK3 inhibitor, 16% of the OCT4-transduced CD34(+) cells are converted into iMSCs within 2 weeks. Efficient direct reprogramming is achieved with both episomal vector-mediated transient OCT4 expression and lentiviral vector-mediated OCT4 transduction. The iMSCs express MSC markers, resemble bone marrow (BM)-MSCs in morphology, and possess in vitro multilineage differentiation capacity, yet have a greater proliferative capacity compared with BM-MSCs. Similar to BM-MSCs, the implanted iMSCs form bone and connective tissues, and are non-tumorigenic in mice. However, BM-MSCs do not, whereas iMSCs do form muscle fibers, indicating a potential functional advantage of iMSCs. In addition, we observed that a high level of OCT4 expression is required for the initial reprogramming and the optimal iMSC self-renewal, while a reduction of OCT4 expression is required for multilineage differentiation. Our method will contribute to the generation of patient-specific iMSCs, which could have applications in regenerative medicine. This discovery may also facilitate the development of strategies for direct conversion of blood cells into other types of cells of clinical importance.