. Stem cell‐based therapy is considered to be a new hope in transplantation medicine. Among stem cells, mesenchymal stem cells (MSCs) are, due to their differentiation and immuno‐modulatory characteristics, the most commonly used as therapeutic agents in the treatment of immune‐mediated diseases. MSCs migrate to the site of inflammation and modulate immune response. The capacity of MSC to alter phenotype and function of immune cells are largely due to the production of soluble factors which expression varies depending on the pathologic condition to which MSCs are exposed. Under inflammatory conditions, MSCs‐derived factors suppress both innate and adaptive immunity by attenuating maturation and capacity for antigen presentation of dendritic cells, by inducing polarization of macrophages towards alternative phenotype, by inhibiting activation and proliferation of T and B lymphocytes and by reducing cytotoxicity of NK and NKT cells. In this review, we emphasized current findings regarding immuno‐modulatory effects of MSC‐derived factors and emphasize their potential in the therapy of immune‐mediated diseases. © 2017 BioFactors, 43(5):633–644, 2017