Mesenchymal stem cells (MSCs) have multiple properties including anti-inflammatory and immunomodulatory effects in various disease models and clinical treatments. These beneficial effects, however, are sometimes inconsistent and unpredictable. For wider and proper application, scientists sought to improve MSC functions by engineering. We aimed to invent a novel method to produce synthetic biological drugs from engineered MSCs. We investigated the anti-arthritic effect of engineered MSCs in a collagen-induced arthritis (CIA) model. Biologics such as etanercept are the most successful drugs used in anti-cytokine therapy. Biologics are made of protein components, and thus can be theoretically produced from cells including MSCs. MSCs were transfected with recombinant minicircles encoding etanercept (trade name, Enbrel), which is a tumour necrosis factor α blocker currently used to treat rheumatoid arthritis. We confirmed minicircle expression in MSCs in vitro based on GFP. Etanercept production was verified from the conditioned media. We confirmed that self-reproduced etanercept was biologically active in vitro. Arthritis subsided more efficiently in CIA mice injected with mcTNFR2MSCs than in those injected with conventional MSCs or etanercept only. Although this novel strategy is in a very early conceptual stage, it seems to represent a potential alternative method for the delivery of biologics and engineering MSCs.