EXHIBIT 99.2

[STEMCELLS LOGO]

COMPANY CONTACT                               INVESTOR RELATIONS
Martin McGlynn                                Ina McGuinness or Bruce Voss
Chief Executive Officer                       Lippert/Heilshorn & Associates
(650) 475-3100                                (310) 691-7100
                                              imcguinness@lhai.com

FOR IMMEDIATE RELEASE

             STEMCELLS RAISES $22.5 MILLION IN NEW EQUITY FINANCING

PALO ALTO, CALIF., OCTOBER 26, 2004 -- StemCells, Inc. (NASDAQ: STEM) announced
today that it has entered into definitive agreements with institutional
investors with respect to the registered direct placement of 7,500,000 shares of
its common stock at a purchase price of $3.00 per share, for gross proceeds of
approximately $22,500,000. C.E. Unterberg, Towbin, LLC and Shoreline Pacific,
LLC served as placement agents for the transaction.

The transaction is expected to be consummated within the next few days following
satisfaction of certain customary closing conditions contained in the definitive
transaction agreements.

StemCells sold these shares under a shelf registration statement previously
filed with and declared effective by the U.S. Securities and Exchange
Commission.

ABOUT STEMCELLS INC.
StemCells, Inc. is a biotechnology company focused on the discovery, development
and commercialization of stem cell-based therapies to treat diseases of the
nervous system, liver, and pancreas. The Company's stem cell programs seek to
repair or repopulate neural or other tissue that has been damaged or lost as a
result of disease or injury. Further information about the Company is available
on its web site at www.stemcellsinc.com.

Apart from statements of historical facts, the text of this press release
constitutes forward-looking statements regarding, among other things, the future
business operations of StemCells, Inc. ("the Company"). The forward-looking
statements speak only as of the date of this news release. StemCells does not
undertake to update any of these forward-looking statements to reflect events or
circumstances that occur after the date hereof. Such statements reflect
management's current views and are based on certain assumptions that may or may
not ultimately prove valid. The Company's actual results may vary materially
from those contemplated in the forward-looking statements due to risks and
uncertainties to which the Company is subject, including uncertainties regarding
the Company's ability to obtain the capital resources needed to continue its
current research and development operations and to conduct the research,
preclinical development and clinical trials necessary for regulatory approvals;
the fact that the Company's stem cell technology is at the pre-clinical stage
and has not yet led to the development of any proposed product; the uncertainty
whether the Company will be able to file an IND in the time it projects and
whether the FDA will permit it to proceed to clinical testing; the uncertainty
whether the Company will achieve revenues from product sales or become
profitable; uncertainties regarding the Company's obligations in regard to its
former encapsulated cell therapy facilities in Rhode Island; and other factors
that are described in Exhibit 99 to the Company's Annual Report on Form 10-K
entitled "Cautionary Factors Relevant to Forward-Looking Statements."


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