BACKGROUND AND OBJECTIVES: Experimental evidence and preliminary clinical studies have demonstrated that human mesenchymal stem cells (MSC) have an important immune modulatory function in the setting of allogeneic hematopoietic stem cell (HSC) transplantation. We extended the evaluation of mechanisms responsible for the immune regulatory effect derived from the interaction of human MSC with cells involved in alloantigen-specific immune response in mixed lymphocyte culture (MLC). DESIGN AND METHODS: Dendritic cell (DC) differentiation, T- and natural killer (NK)-lymphocyte expansion, alloantigen-specific cytotoxic activity and differentiation of CD4+ T-cell subsets co-expressing CD25 and/or CTLA4 molecules were assessed, comparing the effect observed using third-party MSC with that obtained employing MSC autologous to the MLC responder. RESULTS: We found that human MSC strongly inhibit alloantigen-induced DC1 differentiation, down-regulate alloantigen-induced lymphocyte expansion, especially that of CD8+ T cells and of NK lymphocytes, decrease alloantigen-specific cytotoxic capacity mediated by either cytotoxic T lymphocytes or NK cells and favor the differentiation of CD4+ T-cell subsets co-expressing CD25 and/or CTLA4. More effective suppressive activity on MLC-induced T-cell activation was observed when MSC were third-party, rather than autologous, with respect to MLC-responder cells. INTERPRETATION AND CONCLUSIONS: Our results strongly suggest that MSC-mediated inhibition of alloantigen-induced DC1 differentiation and preferential activation of CD4+ CD25+ T-cell subsets with presumed regulatory activity represent important mechanisms contributing to the immunosuppressive activity of MSC. Collectively, these data provide immunological support for the use of MSC to prevent immune complications related to both HSC and solid organ transplantation and to the theory that MSC are universal suppressors of immune reactivity.