Stromal progenitors are found in many different tissues, where they play an important role in the maintenance of tissue homeostasis owing to their ability to differentiate into parenchymal cells. These progenitor cells are differentially pre-programmed by their tissue microenvironment but, when cultured and stimulated in vitro, these cells — commonly referred to as mesenchymal stromal cells (MSCs) — exhibit a marked plasticity to differentiate into many different cell lineages. Loss-of-function studies in vitro and in vivo have uncovered the involvement of specific signalling pathways and key transcriptional regulators that work in a sequential and coordinated fashion to activate lineage-selective gene programmes. Recent advances in omics and single-cell technologies have made it possible to obtain system-wide insights into the gene regulatory networks that drive lineage determination and cell differentiation. These insights have important implications for the understanding of cell differentiation, the contribution of stromal cells to human disease and for the development of cell-based therapeutic applications.