INTRODUCTION: Although breast phyllodes tumors are rare, there is no effective therapy other than surgery. Little is known about their tumor biology. A malignant phyllodes tumor contains heterologous stromal elements, and can transform into rhabdomyosarcoma, liposarcoma and osteosarcoma. These versatile properties prompted us to explore their possible relationship to mesenchymal stem cells (MSCs) and to search for the presence of cancer stem cells (CSCs) in phyllodes tumors. METHODS: Paraffin sections of malignant phyllodes tumors were examined for various markers by immunohistochemical staining. Xenografts of human primary phyllodes tumors were established by injecting freshly isolated tumor cells into the mammary fat pad of non-obese diabetic-severe combined immunodeficient (NOD-SCID) mice. To search for CSCs, xenografted tumor cells were sorted into various subpopulations by flow cytometry and examined for their in vitro mammosphere forming capacity, in vivo tumorigenicity in NOD-SCID mice and their ability to undergo differentiation. RESULTS: Immunohistochemical analysis revealed the expression of the following 10 markers: CD44, CD29, CD106, CD166, CD105, CD90, disialoganglioside (GD2), CD117, Aldehyde dehydrogenase 1 (ALDH), and Oct-4, and 7 clinically relevant markers (CD10, CD34, p53, p63, Ki-67, Bcl-2, vimentin, and Globo H) in all 51 malignant phyllodes tumors examined, albeit to different extents. Four xenografts were successfully established from human primary phyllodes tumors. In vitro, ALDH+ cells sorted from xenografts displayed approximately 10-fold greater mammosphere-forming capacity than ALDH- cells. GD2+ cells showed a 3.9-fold greater capacity than GD2- cells. ALDH+/GD2+cells displayed 12.8-fold greater mammosphere forming ability than ALDH-/GD2- cells. In vivo, the tumor-initiating frequency of ALDH+/GD2+ cells were up to 33-fold higher than that of ALDH+ cells, with as few as 50 ALDH+/GD2+ cells being sufficient for engraftment. Moreover, we provided the first evidence for the induction of ALDH+/GD2+ cells to differentiate into neural cells of various lineages, along with the observation of neural differentiation in clinical specimens and xenografts of malignant phyllodes tumors. ALDH+ or ALDH+/GD2+ cells could also be induced to differentiate into adipocytes, osteocytes or chondrocytes. CONCLUSIONS: Our findings revealed that malignant phyllodes tumors possessed many characteristics of MSC, and their CSCs were enriched in ALDH+ and ALDH+/GD2+ subpopulations.