Stem cell identity and plasticity are controlled by master regulatory genes and complex circuits also involving non-coding RNAs. Circular RNAs (circRNAs) are a class of RNAs generated from protein-coding genes by backsplicing, resulting in stable RNA structures devoid of free 5' and 3' ends. Little is known of the mechanisms of action of circRNAs, let alone in stem cell biology. In this study, for the first time, we determined that a circRNA controls mesenchymal stem cell (MSC) identity and differentiation. High-throughput MSC expression profiling from different tissues revealed a large number of expressed circRNAs. Among those, circFOXP1 was enriched in MSCs compared to differentiated mesodermal derivatives. Silencing of circFOXP1 dramatically impaired MSC differentiation in culture and in vivo. Furthermore, we demonstrated a direct interaction between circFOXP1 and miR-17-3p/miR-127-5p, which results in the modulation of non-canonical Wnt and EGFR pathways. Finally, we addressed the interplay between canonical and non-canonical Wnt pathways. Reprogramming to pluripotency of MSCs reduced circFOXP1 and non-canonical Wnt, whereas canonical Wnt was boosted. The opposing effect was observed during generation of MSCs from human pluripotent stem cells. Our results provide unprecedented evidence for a regulatory role for circFOXP1 as a gatekeeper of pivotal stem cell molecular networks.