Human osteosarcoma harbors a small subpopulation of cancer stem cells (CSCs) that is believed to be associated with tumor metastasis, radioresistance/chemoresistance, local invasion, and poor clinical outcome. In this study, we found that transforming growth factor b1 (TGF-b1) signaling and a hypoxic environment dramatically induced selfrenewal capacity in non-stem osteosarcoma cells, which in turn promoted chemoresistance, tumorigenicity, neovasculogenesis, and metastatic potential. Furthermore, blocking the TGF-b1 signaling pathway resulted in the inhibition of the dedifferentiation and clonogenicity of osteosarcoma cells, and the reduction of CSC self-renewal capacity and hypoxia-mediated dedifferentiation. These findings demonstrate that stem cells and non-stem cells exist in a dynamic equilibrium within the osteosarcoma cell population, and that CSCs may develop de novo from differentiated cancer cells. Hierarchical models of mammalian CSCs, therefore, should be considered to serve as bidirectional interconversion between the stem and non-stem cell components of the tumor. STEM CELLS 2013;31:433-446 Disclosure of potential conflicts of interest is found at the end of this article.