Background: Adult bone marrow-derived mesenchymal stem cells (MSC) possess potent immune modulatory effects which support their possible use as a therapy for immune-mediated disease. MSC induce regulatory T cells (T reg ) in vitro although the in vivo relevance of this is not clear. Objective: This study addressed the hypothesis that adult bone marrow derived- MSC would prevent the pathology associated with allergen-driven airway inflamma- tion, and sought to define the effector mechanism. Methods: The influence of allogeneic MSC was examined in a model system where T reg induction is essential to prevent pathology. This was tested using a combination of a model of ovalbumin-driven inflammation with allogeneic MSC cell therapy. Results: Systemic administration of allogeneic MSC protected the airways from allergen-induced pathology, reducing airway inflammation and allergen-specific IgE. MSC were not globally suppressive but induced CD4 + FoxP3 + T cells and modu- lated cell-mediated responses at a local and systemic level, decreasing IL-4 but increasing IL-10 in bronchial fluid and from allergen re-stimulated splenocytes. Moderate dose cyclophosphamide protocols were used to differentially ablate T reg responses; under these conditions the major beneficial effect of MSC therapy was lost, suggesting induction of T reg as the key mechanism of action by MSC in this model. In spite of the elimination of T reg , a significant reduction in airway eosino- philia persisted in those treated with MSC. Conclusion: These data demonstrate that MSC induce T reg in vivo and reduce allergen-driven pathology. Multiple T reg dependent and independent mechanisms of therapeutic action are employed by MSC