REGISTRATION NO. 333-61726

                                STEMCELLS, INC.
                             PROSPECTUS SUPPLEMENT
                       (TO PROSPECTUS DATED JULY 2, 2001)

    You should read this prospectus supplement and the related prospectus
carefully before you invest. Both documents contain information you should
consider when making your investment decision.

    We delivered a draw down notice to Sativum Investments Limited, dated as of
July 11, 2001, in connection with the common stock purchase agreement dated as
of May 10, 2001 evidencing an equity line facility between us and Sativum. In
the draw down notice, we notified Sativum that we are exercising our right to
sell up to $5,000,000 of our common stock to Sativum based on the formula in the
stock purchase agreement, during the 20 trading days beginning on July 12, 2001
and ending on August 8, 2001. During the first 10 trading days, Sativum
purchased a total of 425,134 shares of our common stock at an average purchase
price of $5.88 per share, net of Sativum's discount of six percent. Our
placement agents, Pacific Crest Securities, Inc. and Granite Financial
Group, Inc. received $50,000 and $25,000, respectively, as placement fees in
connection with this draw down, resulting in net proceeds to us of $2,424,000
for the first 10 trading day settlement period after paying escrow fees.

    The attached prospectus relates to the resale of shares acquired by Sativum
pursuant to the stock purchase agreement. Because Sativum may sell some or all
of these shares, and because there are currently no agreements, arrangements or
understandings with respect to the sale of any of these shares, we cannot
estimate the actual amount of shares that it will hold after the completion of
the offering.

    We expect to use the proceeds of this sale of common stock primarily for
general corporate purposes. We will not receive any proceeds from the resale of
our common stock by Sativum.


    On July 19, 2001, Millennium Partners, L.P. exercised its right under an
adjustable common stock purchase warrant to purchase 622,469 shares of our
common stock for $6,225.

            The date of this prospectus supplement is July 27, 2001.