Mesenchymal stromal cells (MSCs) may be derived from a variety of tissues, with human umbilical cord (UC) providing an abundant and noninvasive source. Human UC-MSCs share similar in vitro immunosuppressive properties as MSCs obtained from bone marrow and cord blood. However, the mechanisms and cellular interactions used by MSCs to control immune responses remain to be fully elucidated. In this paper, we report that suppression of mitogen-induced T cell proliferation by human UC-, bone marrow-, and cord blood-MSCs required monocytes. Removal of monocytes but not B cells from human adult PBMCs (PBMNCs) reduced the immunosuppressive effects of MSCs on T cell proliferation. There was rapid modulation of a number of cell surface molecules on monocytes when PBMCs or alloantigen-activated PBMNCs were cultured with UC-MSCs. Indomethacin treatment significantly inhibited the ability of UC-MSCs to suppress T cell proliferation, indicating an important role for PGE(2). Monocytes purified from UC-MSC coculture had significantly reduced accessory cell and allostimulatory function when tested in subsequent T cell proliferation assays, an effect mediated in part by UC-MSC PGE(2) production and enhanced by PBMNC alloactivation. Therefore, we identify monocytes as an essential intermediary through which UC-MSCs mediate their suppressive effects on T cell proliferation.