There is growing interest in the use of mesenchymal stem cells (MSC) for immune therapy. Clinical trials that use MSC for treatment of therapy resistant graft versus host disease, Crohn's disease and organ transplantation have initiated. Nevertheless, the immunomodulatory effects of MSC are only partly understood. Clinical trials that are supported by basic research will lead to better understanding of the potential of MSC for immunomodulatory applications and to optimization of such therapies. In this manuscript we review some recent literature on the mechanisms of immunomodulation by MSC in vitro and animal models, present new data on the secretion of pro-inflammatory and anti-inflammatory cytokines, chemokines and prostaglandins by MSC under resting and inflammatory conditions and discuss the hopes and expectations of MSC-based immune therapy. (C) 2010 Elsevier B.V. All rights reserved.