Recent studies have identified olfactory ecto-mesenchymal stem cells (OE-MSCs) as a new type of resident stem cell in the olfactory lamina propria. However, it remains unclear whether OE-MSCs possess any immunoregulatory functions. In this study, we found that mouse OE-MSCs expressed higher transforming growth factor-beta and interleukin-10 levels than bone marrow-derived MSCs. In culture, OE-MSCs exerted their immunosuppressive capacity via directly suppressing effector T-cell proliferation and increasing regulatory T (Treg) cell expansion. In mice with collagen-induced arthritis, adoptive transfer of OE-MSCs markedly suppressed arthritis onset and disease severity, which was accompanied by increased Treg cells and reduced Th1/Th17 cell responses in vivo. Taken together, our findings identified a novel function of OE-MSCs in regulating T-cell responses, indicating that OE-MSCs may represent a new cell therapy for the treatment of rheumatoid arthritis and other autoimmune diseases.