Recently, a number of clinical trials used either mesenchymal stem cells (MSCs) or natural killer (NK) cells in an attempt to improve the effectiveness of hematopoietic stem cell transplantation (HSCT). In view of the relevant role of both MSCs and NK cells in HSCT, we have recently explored the result of possible interactions between the 2 cell types. We found that activated NK cells could kill MSCs, whereas MSCs strongly inhibited interleukin-2 (IL-2)–induced NK-cell proliferation. In this study, we further analyzed the inhibitory effect exerted by MSCs on NK cells. We show that MSCs not only inhibit the cytokine-induced proliferation of freshly isolated NK cells but also prevent the induction of effector functions, such as cytotoxic activity and cytokine production. Moreover, we show that this inhibitory effect is related to a sharp down-regulation of the surface expression of the activating NK receptors NKp30, NKp44, and NKG2D. Finally, we demonstrate that indoleamine 2,3-dioxygenase and prostaglandin E2 represent key mediators of the MSC-induced inhibition of NK cells.