Rheumatoid arthritis (RA) is a chronic, inflammatory autoimmune disorder that causes the immune system to attack the joints. Transforming growth factor-${eta}1$ (TGF-${eta}1$) is a secreted protein that promotes differentiation of synovial fibroblasts to ${alpha}$-smooth muscle actin (${alpha}$-SMA)-positive myofibroblasts to repair the damaged joints. Synovial fluid from patients with RA (RA-SF) induced expression of ${alpha}$-SMA in human adipose tissue-derived mesenchymal stem cells (hASCs). RA-SF-induced ${alpha}$-SMA expression was abrogated by immunodepletion of TGF-${eta}1$ from RA-SF with anti- TGF-${eta}1$ antibody. Furthermore, pretreatment of hASCs with the TGF-${eta}$ type I receptor inhibitor SB431542 or lentiviral small hairpin RNA-mediated silencing of TGF-${eta}$ type I receptor expression in hASCs blocked RA-SF-induced ${alpha}$-SMA expression. Small interfering RNA-mediated silencing of Smad2 or adenoviral overexpression of Smad7 (an inhibitory Smad isoform) completely inhibited RA-SF-stimulated ${alpha}$-SMA expression. These results suggest that TGF-${eta}1$ plays a pivotal role in RA-SF-induced differentiation of hASCs to ${alpha}$-SMA-positive cells.