The microenvironment of placental mesenchymal stem cells (PMSCs) is dynamic throughout gestation and determines changes in cell fate. In vivo, PMSCs initially develop in low-oxygen tension and low IGF-I concentrations, and both increase gradually with gestation. The impact of varying concentrations of IGF-I and changing oxygen tension on PMSC signaling and multipotency was investigated in PMSCs from early (preterm) and late (term) gestation human placentae. Preterm PMSCs had greater proliferative response to IGF-I, which was further enhanced by low-oxygen tension. Low-oxygen tension alone was sufficient to induce ERK1/2 phosphorylation, whereas IGF-I was required for AKT (protein kinase B) phosphorylation. Low-oxygen tension prolonged ERK1/2 and AKT phosphorylation with a slowed phosphorylation decay even in presence of IGF-I. Low-oxygen tension maintained higher levels of IGF-I receptor and insulin receptor substrate 1 that were otherwise decreased by exposure to IGF-I and induced a differential phosphorylation pattern on IGF-I receptorβ and insulin receptor substrate 1. Phosphorylation of ERK1/2 and AKT was different between the preterm and term PMSCs, and phospho-AKT, and not phospho-ERK1/2, was the major determinant of PMSC proliferation and octamer-4 levels. These studies demonstrate that low-oxygen tension regulates the fate of PMSCs from early and late gestations in response to IGF-I, both independently and dependently, via specific signal transduction mechanisms.