Though experimental evidence shows that human bone marrow-derived mesenchymal stem cells (hBMSCs) are able to suppress T-cell activation and proliferation, the precise mechanisms are still not completely understood. Here, we investigated the role of the negative costimulatory molecule B7-H4 in the immunosuppressive effect of hBMSCs on T-cell activation. We showed that B7-H4 expresses abundantly on hBMSCs assessed by reverse transcription, immunofluorescence staining, and flow cytometric analysis. Further studies demonstrated that B7-H4 expressed on hBMSCs inhibits T-cell activation and proliferation via induction of cell cycle arrest and inhibition of NF-kappaB nuclear translocation. Blocking B7-H4 would decrease the secretion of transforming growth factor-beta1 (TGF-beta1) in the supernatant of activated T cells co-cultured with hBMSCs. Addition of neutralizing antibodies against B7-H4 significantly attenuated the inhibitory effects of hBMSCs on T-cells. Thus, our study established the novel role of B7-H4 molecule in the suppressive effect of hBMSCs on T-cell activation and proliferation. Taken together, these results highlight the complex role of hBMSCs in regulating the immune response, asserting the possibility of their therapeutic application in transplantation, the treatment of graft-versus-host disease (GVHD), and autoimmune diseases.