Mesenchymal stem cells (MSCs) are the nonhematopoietic multipotent progenitor cells found in various adult tissues. They are characterized by their ease of isolation and their rapid growth in vitro while maintaining their differentiation potential, allowing for extensive expansion in culture that yields large quantities suitable for therapeutic use. This article reviews the immunomodulatory activities associated with MSCs. Numerous studies have demonstrated that MSCs are potently immunosuppressive in vitro and in vivo. However, this article presents a new paradigm in MSC biology, in which MSCs, at least in vitro, can undergo polarization into either a pro-inflammatory or an immunosuppressive phenotype.