Mesenchymal stem cell (MSC) is a promising tool for the therapy of immune disorders. However, their efficacy and mechanisms in treating allergic skin disorders are less verified. We sought to investigate the therapeutic efficacy of human umbilical cord blood‐derived MSCs (hUCB‐MSCs) against murine atopic dermatitis (AD) and to explore distinct mechanisms that regulate their efficacy. AD was induced in mice by the topical application of Dermatophagoides farinae. Naïve or activated‐hUCB‐MSCs were administered to mice, and clinical severity was determined. The subcutaneous administration of nucleotide‐binding oligomerization domain 2 (NOD2)‐activated hUCB‐MSCs exhibited prominent protective effects against AD, and suppressed the infiltration and degranulation of mast cells (MCs). A β‐hexosaminidase assay was performed to evaluate the effect of hUCB‐MSCs on MC degranulation. NOD2‐activated MSCs reduced the MC degranulation via NOD2‐cyclooxygenase‐2 signaling. In contrast to bone marrow‐derived MSCs, hUCB‐MSCs exerted a cell‐to‐cell contact‐independent suppressive effect on MC degranulation through the higher production of prostaglandin E2 (PGE2). Additionally, transforming growth factor (TGF)‐β1 production from hUCB‐MSCs in response to interleukin‐4 contributed to the attenuation of MC degranulation by downregulating FcεRI expression in MCs. In conclusion, the subcutaneous application of NOD2‐activated hUCB‐MSCs can efficiently ameliorate AD, and MSC‐derived PGE2 and TGF‐β1 are required for the inhibition of MC degranulation. Stem Cells 2015;33:1254–1266