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Delivery of growth factor for the differentiation of stem cells into lineage specific cells holds great potential in regenerative medicine. Stem cell differentiation is governed by cytokines and growth factors secreted upon the organelle injury and, however, their short half-life necessitates exogenous supply. Development of suitable nanodevices using biodegradable polymers to deliver therapeutic proteins to the targeted site in a sustainable manner attracts scientists and clinicians. Here, for the first time, hepatocyte growth factor (HGF) was incorporated into chitosan nanoparticles (CNP) by ionotrophic gelation method. An average size of nanoparticles prepared was 100 nm, showing sustainable release of HGF. Cytotoxicity study did not reveal any adverse effect on bone marrow mesenchymal stem cells (MSC) up to 4 mg CNP/ml culture medium. To evaluate the effect of HGF incorporated CNP (HGF-CNP) on hepatic differentiation in in vitro, MSC were incubated with HGF-CNP and other supplements. After 21 days, fibroblast-like morphology of MSC became round-shape, a typical characteristic of hepatocyte cell. Immunofluorescence study for albumin expression confirmed the hepatic differentiation. In conclusion, HGF released from the HGF-CNP can differentiate MSC into hepatocytes, and this novel technique could also be extended to deliver therapeutic proteins for a variety of tissue regeneration.