Orthopaedic tissues, such as bone, cartilage, intervertebral disc and tendon, contain cells that are difficult to culture and stimulate in vitro for repair of damaged tissue. Stem cells have the ability to self-renew and differentiate into many tissue types. Recent progress in stem cell research has led to an enthusiastic effort to utilize stem cells for orthopaedic tissue regeneration. Due to ease of harvest and abundance, adipose-derived mesenchymal cells (ASC) are an attractive, readily available adult stem cell that has become increasingly popular for use in many stem cell applications. Recent progress has been made in characterizing ASC and looking mechanistically at gene expression and cellular pathways involved in differentiation. This review focuses on (i) the characterization of ASC through expression of appropriate surface markers; (ii) modulation of in vitro differentiation of ASC through different scaffolds, growth factors, and media; and (iii) the use of ASC in orthopaedic tissue repair. Strategies for repair involve the use of differentiated or undifferentiated, fresh or passaged ASC, in conjunction with appropriate choice of media, growth factors and scaffolds. Recent in vivo studies utilizing ASC are discussed giving results on defect repair and potential for clinical orthopaedic tissue regeneration.