In vitro culture techniques must be improved to increase the feasibility of cell-based tissue engineering strategies. To enhance nutrient transport we have developed a novel bioreactor, the tubular perfusion system (TPS), to culture human mesenchymal stem cells (hMSCs) in three-dimensional scaffolds. This system utilizes an elegant design to create a more effective environment for cell culture. In our design, hMSCs in the TPS bioreactor are encapsulated in alginate beads that are tightly packed in a tubular growth chamber. The medium is perfused by a peristaltic pump through the growth chamber and around the tightly packed scaffolds enhancing nutrient transfer while exposing the cells to shear stress. Results demonstrate that bioreactor culture supports early osteoblastic differentiation of hMSCs as shown by alkaline phosphatase gene expression. After 14 and 28 days of culture significant increases in the gene expression levels of osteocalcin, osteopontin, and bone morphogenetic protein-2 were observed with bioreactor culture, and expression of these markers was shown to increase with media flow rate. These results demonstrate the TPS bioreactor as an effective means to culture hMSCs and provide insight to the effect of long-term shear stresses on differentiating hMSCs.