Mesenchymal stromal cells (MSCs) have recently emerged as promising candidates for cell-based immunotherapy in solid organ transplantation (SOT). In addition to immune modu-lation, MSCs possessproreparative propertiesand preclinical studies indicatethat MSCs havethe capacity to prolong graft survival and in some cases induce tolerance. Currently, theapplication of MSCs in SOT is being evaluated in phase I/II clinical trials. Whereas themechanisms of action used by MSC immunomodulation have been somewhat elucidatedin vitro, the data from preclinical transplant models have been unclear. Furthermore, theoptimal timing, dose,and routeof administration remain tobe elucidated.Importantly, MSCshave the ability to sense their environment, which may influence their function. In thisarticle, we discuss the impact of the local microenvironment on MSCs and the mechanismsof MSC immunomodulation in the setting of SOT.