Mesenchymal stem cells (MSCs) have the ability to suppress T cell proliferation and modulate cytokine production. Recently, MSCs have been shown to ameliorate autoimmune diseases such as experimental autoimmune encephalomyelitis (EAE), but in some cases shown to stimulate lymphocyte proliferation. So far, mechanisms through which MSCs modulate immune reactions are still undefined. In this report we demonstrate that MSCs have the capacity for either stimulating or inhibiting myelin basic protein-specific T lymphocytes in a dose-dependent manner and modulate antigen-stimulated T cells to differentiate into either T helper type 17 or regulatory T cells, respectively, via pathways involving transforming growth factor-β and interleukin-6. These results may lead better utility of MSCs as a treatment for autoimmune disease.