Oxysterols are intermediates of large family 27-carbon cholesterol that are present in the circulation of human and animals. 20(S)Hydroxycholesterol (20S) is the most potent naturally occurring oxysterol that has the capacity to promote osteogenesis and decrease adipogenesis in pluripotent mesenchymal stem cells (MSCs) derived from mammals. However, the effect of the 20S on chicken derived MSCs has not been studied yet. Understanding the effect of 20S oxysterol in multilineage differentiation potential of MSCs can identify 20S as a potential bioactive compound that can be useful for the poultry industry. MSCs isolation methodology was developed to isolate primary MSCs from the compact bone of day old broiler chicks. 20S oxysterol was subjected to treatment with isolated primary cells at passage 4 to understand the osteogenic, adipogenic, and myogenic differentiation of MSCs and pathway involved triggered by 20S in the process of differentiation. Further, in ovo injection was conducted in chicken embryo at different time point of incubation to understand the effect of 20S on embryogenic development, growth of chick, multilineage gene expression and hatchability in vivo. Compact bone derived MSCs showed all the characteristic such as multilineage differentiation potential, adherent to plastic, appropriate cell surface markers, and ability to form a colony to be considered as mesenchymal stem cells. 20S oxysterol induced pro-osteogenic, pro-myogenic and anti-adipogenic differentiation potential when subject to cBMSCs on confluency. 20S oxysterol exerted its osteoinductive and anti-adipogenic effects through activation of Hedgehog signaling pathway. 20S oxysterol also inducted Hedgehog signaling and osteoinductive genes at the different time point of harvest when injected into the embryo at 3, 7 and 18 day of incubation. However, hatchability, weight of hatched chicks, bone mineral density, bone mineral content was not different between the treatment groups. 20S could have a very important role in the regulation of lipid and osteogenic metabolism. Further studies need to be conducted to understand the details of the pathways involved in multilineage differentiation of MSCs exerted by 20S in vivo and to understand the possibility of using 20S as a bioactive compound in ovo for better chick quality and post hatch preformation efficiency.