Ewing's sarcoma family tumors (ESFT) express the EWS-FLI-1 fusion gene generated by the chromosomal translocation t(11;22)(q24;q12). Expression of the EWS-FLI-1 fusion protein in a permissive cellular environment is believed to play a key role in ESFT pathogenesis. However, EWS-FLI-1 induces growth arrest or apoptosis in differentiated primary cells, and the identity of permissive primary human cells that can support its expression and function has until now remained elusive. Here we show that expression of EWS-FLI-1 in human mesenchymal stem cells (hMSC) is not only stably maintained without inhibiting proliferation but also induces a gene expression profile bearing striking similarity to that of ESFT, including genes that are among the highest ESFT discriminators. Expression of EWS-FLI-1 in hMSCs may recapitulate the initial steps of Ewing's sarcoma development, allowing identification of genes that play an important role early in its pathogenesis. Among relevant candidate transcripts induced by EWS-FLI-1 in hMSCs, we found the polycomb group gene EZH2, which we show to play a critical role in Ewing's sarcoma growth. These observations are consistent with our recent findings using mouse mesenchymal progenitor cells and provide compelling evidence that hMSCs are candidate cells of origin of ESFT.