Myelodysplastic syndrome (MDS) is a group of progressive,clonal, neoplastic bone marrow disorders characterized by hematopoietic stem cell dysregulation and abnormalities in the immune system. Mesenchymal stem cells (MSC) appear to modulate the immune system at the very first step of the immune response through the inhibition of dendritic cells (DCs) differentiation and maturation. However, it is still unclear whether the effects of MSC on the development of DCs will be altered with disease state. In addition, it is not clear whether there are differences in the effects between low-risk and high-risk MDS-MSC on DCs development. In this study, our data confirm that MDS-MSC mediate a potent inhibition of DCs differentiation. Additionally, MDS-MSC greatly alter DCs functions, including endocytosis, IL-12 secretion, their ability to inhibit T cell proliferation. Moreover, our results show that there are major differences in DCs development and function between low-risk and high-risk MDS-MSC. Compared to high-risk MDS-MSC, low-risk MDS-MSC is characterized by a poor ability to inhibit DCs differentiation and maturation; and correspondingly, less dysfunctional DC endocytosis, mildly decreased IL-12 secretion, and a reduction in DC-mediated inhibition of T cell proliferation. Finally, our results demonstrate that MDS-MSC derived TGF-β1 is largely responsible for the inhibitory effects. These results elucidate the different immunoregulatory role of MSC in low-risk and high-risk MDS on DCs development, which may be important for understanding the pathogenesis of MDS and the development of novel immune therapies for the treatment of MDS.