Mesenchymal stem cells (MSCs) inhibit T-cell activation and proliferation but their effects on individual T-cell-effector pathways and on memory versus naı¨ve T cells remain unclear. MSC influence on the differentiation of naı¨ve and memory CD41 T cells toward the Th17 phenotype was examined. CD41 T cells exposed to Th17-skewing conditions exhibited reduced CD25 and IL-17A expression following MSC co-culture. Inhibition of IL-17A production persisted upon re-stimulation in the absence of MSCs. These effects were attenuated when cell–cell contact was prevented. Th17 cultures from highly purified naı¨ve- and memoryphenotype responders were similarly inhibited. Th17 inhibition by MSCs was reversed by indomethacin and a selective COX-2 inhibitor. Media from MSC/Th17 co-cultures contained increased prostaglandin E2 (PGE2) levels and potently suppressed Th17 differentiation in fresh cultures. MSC-mediated Th17 inhibition was reversed by a selective EP4 antagonist and was mimicked by synthetic PGE2 and a selective EP4 agonist. Activation-induced IL-17A secretion by naturally occurring, effector-memory Th17 cells from a urinary obstruction model was also inhibited by MSC co-culture in a COX-dependent manner. Overall, MSCs potently inhibit Th17 differentiation from naı¨ve and memory T-cell precursors and inhibit naturally-occurring Th17 cells derived from a site of inflammation. Suppression entails cellcontact- dependent COX-2 induction resulting in direct Th17 inhibition by PGE2 via EP4.