Aging is the single most common risk factor for cancer. Peripheral and marrow-derived stem cells are long lived and are candidate cells for the cancer-initiating cell. Repeated rounds of replication are likely required for accumulation of the necessary genetic mutations. Based on the facts that mesenchymal stem cells (MSC) transform with higher frequency than other cell types, and tumors in aged C57BL/6 mice are frequently fibrosarcomas, we used a genetically tagged bone marrow (BM) transplant model to show that aged mice develop MSC-derived fibrosarcomas. We further show that, with aging, MSCs spontaneously transform in culture and, when placed into our mouse model, recapitulated the naturally occurring fibrosarcomas of the aged mice with gene expression changes and p53 mutation similar to the in vivo model. Spontaneously transformed MSCs contribute directly to the tumor, tumor vasculature, and tumor adipose tissue, recruit additional host BM-derived cells (BMDC) to the area, and fuse with the host BMDC. Unfused transformed MSCs act as the cancer stem cell and are able to form tumors in successive mice, whereas fusion restores a nonmalignant phenotype. These data suggest that MSCs may play a key role in age-related tumors, and fusion with host cells restores a nonmalignant phenotype, thereby providing a mechanism for regulating tumor cell activity. [Cancer Res 2007;67(22):10889–98]