We and others have reported that neural stem/progenitor cells (NSCs) may exert direct anti-inflammatory activity. This action has been attributed, in part, to T-cell suppression. However, how T-cells become suppressed by NSCs remains unresolved. In this study, we explored one of these mechanisms and challenged some previously advanced hypotheses regarding underlying NSC-mediated T-cell suppression. We employed an easily observable and manipulatable system in which activated and non-activated T-cells were co-cultured with a stable well-characterized clone of lacZ-expressing murine NSCs. As in previous reports, NSCs were found to inhibit T-cell proliferation. However, this inhibition by NSCs was not due to suppression of T cell activation or induction of apoptosis of T cells during the early activation stage. High levels of nitric oxide (NO) and prostaglandin E2 (PGE2) were induced in the T cells when co-cultured with NSCs. In addition, inducible NOS (iNOS) and microsomal type 1 PGES (mPGES-1) were readily detected in NSCs in co-culture with T-cells, but not at all in NSCs cultured alone or in activated T cells cultured with or without NSCs. This finding suggested that activated T cells induced NO and PGE2 production in the NSCs. Furthermore, T-cell proliferation inhibited by co-culture with the NSCs was significantly restored by inhibitors of NO and PGE2 production. Therefore, NSCs appear to suppress T-cells, at least in part, by NO and PGE2 production which, in turn, would account for the well-documented reduction of central nervous system immunopathology by transplanted NSCs.