Dysregulation of the immune system can initiate chronic inflammatory responses that exacerbate disease pathology. Multipotent adult progenitor cells (MAPC cells), an adult adherent bone-marrow derived stromal cell, have been observed to promote the resolution of uncontrolled inflammatory responses in a variety of clinical conditions including acute ischemic stroke, acute myocardial infarction (AMI), graft vs host disease (GvHD), and acute respiratory distress syndrome (ARDS). One of the proposed mechanisms by which MAPC cells modulate immune responses is via the induction of regulatory T cells (Tregs), however, the mechanism(s) involved remains to be fully elucidated. Herein, we demonstrate that, in an in vitro setting, MAPC cells increase Treg frequencies by promoting Treg proliferation and CD4+ T cell differentiation into Tregs. Moreover, MAPC cell-induced Tregs (miTregs) have a more suppressive phenotype characterized by increased expression of CTLA-4, HLA-DR, and PD-L1 and T cell suppression capacity. MAPC cells also promoted Treg activation by inducing CD45RA+ CD45RO+ transitional Tregs. Additionally, we identify transforming growth factor beta (TGFβ) as an essential factor for Treg induction secreted by MAPC cells. Furthermore, inhibition of indoleamine 2, 3-dioxygenase (IDO) resulted in decreased Treg induction by MAPC cells demonstrating IDO involvement. Our studies also show that CD14+ monocytes play a critical role in Treg induction by MAPC cells. Our study describes MAPC cell dependent Treg phenotypic changes and provides evidence of potential mechanisms by which MAPC cells promote Treg differentiation.