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CORRESP

 April 5, 2016

 VIA EDGAR

 U.S. Securities and Exchange Commission

 Mail Stop 6010

 Division of Corporation Finance

 100 F Street, NE

Washington, D.C. 20549

Attention:

Suzanne Hayes, Assistant Director

Office of Healthcare and Insurance

Re:
    SEC Comment Letter, dated March 31, 2016

    StemCells, Inc.

    Form Pre 14A filed March 14, 2016

    File No. 000-19871

Ladies and Gentlemen:

 On behalf of StemCells, Inc. (the
“Company”), this letter is being submitted to the Staff of the Securities and Exchange Commission (the “Staff”) in response to the comments in the Staff’s letter dated March 31, 2016 (the “March 31 Letter”)
regarding the Company’s preliminary proxy statement, filed on March 14, 2016, in connection with the Company’s 2016 annual stockholder meeting (the “2016 Proxy”).

For reference purposes, the comments as reflected in the March 31 Letter are reproduced in bold in this letter and the corresponding responses of the
Company are shown below each comment.

 Accordingly, we supplementally advise you as follows:

Proposal Number 3, page 36

1.
 Rule 14a-4(a)(3) under the Securities Exchange Act of 1934 requires you to identify clearly and impartially each separate matter upon which you
intend to act, whether or not related to or conditioned on the approval of other matters. In this regard, we note that you have combined two matters in Proposal 3. Please revise to unbundle Proposal 3 so that the reverse stock split of your common
stock and the disproportionate decrease in the number of authorized shares of common stock following the reverse stock split are two separate proposals. If any of the proposals are mutually conditioned, please revise the proxy statement accordingly
and provide appropriate

7707 Gateway Boulevard Newark, CA 94560 USA

T +1 (510) 456-4000   ●   F +1 (510) 456-4001

www.stemcellsinc.com

 56003253_2

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disclosure regarding the effect of a negative vote on the related proposals. In the alternative, please provide your analysis as to why you do not believe that the reverse stock split and
disproportionate decrease in authorized shares should be presented as separate proposals. For guidance, refer to Exchange Act Release 34-31326 (October 16, 1992) at Section II.H.

Company Response

 We will unbundle Proposal Number 3 so
that the reverse stock split and the disproportionate decrease in the number of authorized shares of common stock are two separate proposals. We will add disclosure relating to the interconnection between the two proposals, because the
reduction in authorized capital can only occur if the Company successfully completes the Reverse Stock Split, as described in Proposal Number 3.

Accordingly, as requested by the Staff, we will revise the 2016 Proxy so that Proposal Number 3 relates solely to the Company’s proposed Reverse Stock
Split. Newly created Proposal Number 4 will relate solely to the Company’s proposal to decrease its authorized share capital from 226 million shares (consisting of 225,000,000 shares of common stock and 1,000,000 shares of undesignated
preferred stock) to 201 million shares (consisting of 200,000,000 shares of common stock and 1,000,000 shares of undesignated preferred stock). We will renumber our current Proposal Number 4, concerning a possible equity line financing
(“Existing Proposal Number 4”), as new Proposal Number 5.

 We have attached to this letter our revised Proposal Number 3 and new Proposal Number
4.

 Existing Proposal Number 4, page 44

2.
We refer to your descriptions regarding the terms of the proposed transaction. Please revise your disclosure to identify the investor and disclose whether the investor is a preexisting investor. Additionally, we
note you have provided some disclosure about the anticipated terms of the transaction, including how the price per share will be set for the initial purchase on the Commencement date; the issuance of shares equal to approximately 2% of the total
dollar value of the equity line; and the 9.99% limitation on issuance. Please revise to clarify that these terms are subject to change and discuss the consequences if they do change.

The Company has not yet entered into an agreement with any investor for an equity line financing. If our stockholders approve Existing Proposal Number 4,
we intend to enter into negotiations with one or more potential investors in the hope of securing an equity line arrangement on terms that would be no less favorable to the Company and its current stockholders than those described in Existing
Proposal Number 4. However, we may not be able to secure an equity line arrangement. Moreover, the Company may choose to enter into a substantially different financing arrangement and/or an equity line arrangement that is materially
different from the equity line described in Existing Proposal Number 4, in which case the Company would not need to use the stockholder vote to satisfy any stockholder approval standards under the Nasdaq Capital Market’s continued listing
requirements.

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 Because there is no existing contract or arrangement, we agree that the final terms of any financing
arrangement entered into within three months following the company’s 2016 annual stockholder meeting could be different from those described in the 2016 Proxy. We will therefore provide enhanced disclosures about the proposed transaction
consistent with the Staff’s request. Specifically, we will add the following paragraph to Existing Proposal Number 4 under the subheading “Terms of the Proposed Transaction”:

At present, we do have not have an existing equity line agreement with any particular investor. If we obtain stockholder approval for the
Equity Line arrangement, as described in this proposal, we expect to endeavor to secure an equity line commitment from an institutional investor with experience providing equity line arrangements to companies in our industry, such as Azimuth
Opportunity, Crede Capital Group, Lincoln Park Capital, Redland Capital Partners, and Tarpon Bay Partners. We would expect the terms of any such equity line arrangement to be substantially similar to those described herein. However, we can give no
assurance that we will be able to secure an equity line arrangement on substantially these terms, if at all. Final terms of the Equity Line, assuming one is entered into by the company within three months following our annual stockholder meeting,
may be different than those described here. If our Board elects to enter into a different type of financing transaction or an equity line financing on substantially different terms than those described here, stockholder approval of this Proposal
Number 5 may not satisfy any stockholder vote standards under the Nasdaq Capital Market’s continued listing requirements.

3.
We refer to your disclosure on page 46 that you have outstanding warrants with “full ratchet” price protection which could result in additional dilution. Please define the term “full ratchet” and
provide additional disclosure to explain the potential effects of such provisions on current stockholders.

 Company Response

We will add additional disclosure concerning our existing warrants with “full ratchet” price protection. Per the Staff’s request, we will change
the third paragraph under the heading “Effect on Currently Outstanding Common Stock,” found on page 46, to read substantially as follows:

In addition, we have outstanding warrants to acquire up to 82,605,761 shares of our common stock at an exercise price per share (in other
words, a “strike price” per share) ranging from $0.2999998 to $1.80, meaning that these warrant holders can elect, until the expiry of their warrants, to purchase additional shares of our common stock at a price ranging from $0.2999998 to
$1.80 per share. However, approximately half of these warrants contain “full ratchet” price protection, which means that the per share strike price for these warrants can be reset, under certain circumstances, to a lower per share strike
price. Most commonly, this occurs when the company issues additional shares of common stock in a financing at an imputed per share price below the warrants’ then-existing per share strike price. Doing so results in the warrants’ per share
strike price adjusting down to the per share price of the newly issued shares.

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 An adjustment to the per share strike price could result in substantial additional dilution
to our existing stockholders. For example, as of April 1, 2016, we had the following outstanding warrants with full ratchet price protection:

 Description of Warrants

Total Shares
Underlying
the Warrants

Current Strike
Price (per shr)

Warrant Expiration
Date

 Series A Warrants (December 2011 financing)

6,936,880

$
0.2999998

Dec 2016

 Series A Warrants (March 2016 financing)

15,331,165

$
0.2999998

Mar 2018

 Series B Warrants (March 2016 financing)

22,996,747

$
0.42

Mar 2022

 Therefore, if we were to sell additional shares of common stock under the Equity Line at a price per share
below $0.42 per share but above $0.30 per share, warrants to acquire up to approximately 22 million additional shares of common stock would have their strike price lowered to the sales price under the Equity Line. Similarly, if we were to sell
additional shares of common stock under the Equity Line at a price per share below $0.2999998 per share, then warrants entitling holders to purchase up to approximately 45 million additional shares of common stock would reset to the lower per share
purchase price of the sale under the Equity Line.

4.
Please revise your disclosure on page 46 to provide additional information regarding your expected use of proceeds from any sales under the Purchase Agreement. See Item 11(c) of Schedule 14A.

We will augment our disclosure with respect to our anticipated use of proceeds to read substantially as follows:

Use of Proceeds.

 We
intend to use any net proceeds raised through the Equity Line for general corporate purposes, including working capital, capital expenditures, research and development expenditures and clinical trial expenditures. A portion of the net proceeds may
also be used for the acquisition of businesses, products and technologies that are complementary to ours, or for other strategic purposes, although we have no current understandings, commitments or agreements to do so. Pending use of the net
proceeds, we intend to invest the net proceeds in short-term, interest-bearing, investment-grade securities.

 ********

Please be advised that, in connection with the Staff’s comments in the March 31 Letter, the Company hereby acknowledges that (i) the Company is
responsible for the adequacy and accuracy of the disclosure in the above-referenced filing; (ii) the Staff’s comments or changes to disclosure in response to the Staff’s comments do not foreclose the U.S. Securities Exchange Commission
(the “Commission”) from taking any action with respect to the filing; and (iii) it is the Staff’s position that the Company may not assert the Staff’s comments as a defense in any proceeding initiated by the Commission or any
person under the federal securities laws of the United States.

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 We hope that the foregoing has been responsive to the Staff’s comments. If you should have any questions
about this letter or require any further information, please call the undersigned at (510) 475-4122.

 Very truly yours,

/s/ Kenneth B. Stratton

 Kenneth B. Stratton

General Counsel

Attachments/

 Proposal Number 3 – Approval of Amendment to the Company’s Certificate of Incorporation to Effect a Reverse Stock Split

Proposal Number 4 – Approval of Amendment to the Company’s Certificate of Incorporation to Decrease Authorized Capital

 PROPOSAL NUMBER 3

Approval of Amendment to the Company’s

Certificate of Incorporation to Effect a Reverse Stock Split

General

 Our Board of Directors has
unanimously adopted a resolution declaring advisable and recommending to the stockholders for their approval a proposal to amend the company’s restated certificate of incorporation, as amended to date, to effect a reverse stock split of the
company’s issued and outstanding common stock at any whole number ratio between, and inclusive of, one for ten and one for fifteen (the “Reverse Stock Split”). Approval of this Proposal Number 3 will grant our Board the authority,
without further action by the stockholders, to carry out the Reverse Stock Split, at any time within three months after the date stockholder approval for the Reverse Stock Split is obtained from our stockholders, with the exact exchange ratio and
timing of the Reverse Stock Split (if at all) to be determined at our Board’s discretion. Our Board’s decision whether or not (and when) to effect a Reverse Stock Split (and at what whole number ratio to effect the Reverse Stock Split)
will be based on a number of factors, including market conditions, existing and anticipated trading prices for our common stock and the continued listing requirements of the NASDAQ Capital Market.

A sample form of the certificate of amendment relating to this Proposal Number 3, which we would file with the Secretary of State of the State
of Delaware to carry out the Reverse Stock Split, is attached to this proxy statement as Schedule 1 (the “First Amendment”).

 As
explained below, we are asking our stockholders to approve this Proposal Number 3 because we believe a Reverse Stock Split will result in a higher price per share for the outstanding shares of our common stock, which should enable us to maintain our
listing on NASDAQ and make our stock more marketable to investors, retail and institutional alike, as investors often have restrictions associated with, or concerns about investing in, “penny” or other low priced stocks. In addition, as
explained below, the Reverse Stock Split, if approved by our stockholders and implemented by our Board, would result in a significant increase in the number of authorized shares of common stock available to us for future issuance to fund our
continued operations and to grow our business.

 What to Expect from a Reverse Stock Split

If approved by our stockholders and Board, the Reverse Stock Split would be implemented simultaneously for all of our then-outstanding common
stock (the “Old Shares”) and the exchange ratio would be the same for all of our issued and outstanding shares of common stock. The Reverse Stock Split would affect all of our stockholders uniformly and would not affect any
stockholder’s percentage ownership interests in the company, except to the extent that the Reverse Stock Split results in any of our stockholders owning a fractional share, because fractional shares would be rounded up to the nearest whole
share. Shares of common stock issued pursuant to the Reverse Stock Split (the “New Shares”) would remain fully paid and nonassessable. The Reverse Stock Split would not affect our continuing to be subject to the periodic reporting
requirements of the Securities Exchange Act of 1934, as amended. Upon becoming effective, the Reverse Stock Split would automatically convert outstanding Old Shares into a smaller fraction of New Shares, depending upon which conversion ratio our
Board may select. Outstanding derivative securities exercisable for, or convertible into, our common stock would be proportionally adjusted, as would the exercise and conversion prices of those derivative securities.

The information in the following table summarizes the possible effect of the Reverse Stock Split based upon the company’s issued and
outstanding equity, as of April 1, 2016:

 Split Ratio for Issued

and Outstanding Shares

Common Stock
Outstanding after
the Reverse Stock
Split (1)

Warrant and
Option Shares
Reserved after the
Reverse Stock Split (1)

Common Stock
Authorized after the
Reverse Stock Split

Post-Split
Com