Mesenchymal stromal cells (MSCs) have been shown to have an immunosuppressive effect. Previously, we demonstrated that nitric oxide (NO) is one of the immunomodulatory mediators of MSCs. We herein show that primary mouse bone marrow MSCs and three cell lines that mimic MSCs suppress both differentiation and proliferation in Th1 condition, whereas the suppression in Th2 condition is mild. NO production is inversely correlated with T cell proliferation in Th1 and Th2 conditions. NO is highly induced in Th1 and minimally induced in Th2. Moreover, an inhibitor of NO synthase restores both proliferation and interferon-gamma (IFN-gamma) production in Th1 condition. Furthermore, an anti-IFN-gamma antibody strongly inhibits NO production and an inhibitor of NF-kappaB reduces the level of induction of inducible NO synthase (iNOS) in MSCs. Taken together, our results suggest that NO plays a significant role in the modification of Th1 and Th2 differentiation by MSCs, and that both IFN-gamma and NF-kappaB are critical for NO production by MSCs.