Mesenchymal stem cells (MSCs) inhibit proliferation of allogeneic T cells and express low levels of major histocompatibility complex class I (MHCI), MHCII and vascular adhesion molecule-1 (VCAM-1). We investigated whether their immunosuppressive properties and low immunophenotype protect allogeneic rat MSCs against cytotoxic lysis in vitro and result in a reduced immune response in vivo. Rat MSCs were partially protected against alloantigen-specific cytotoxic T cells in vitro. However, after treatment with IFN-γ and IL-1β, MSCs upregulated MHCI, MHCII and VCAM-1, and cytotoxic lysis was significantly increased. In vivo, allogeneic T cells but not allogeneic MSCs induced upregulation of the activation markers CD25 and CD71 as well as downregulation of CD62L on CD4+ T cells from recipient rats. However, intravenous injection of allo-MSCs in rats led to the formation of alloantibodies with the capacity to facilitate complement-mediated lysis, although IgM levels were markedly decreased compared with animals that received T cells. The allo-MSC induced immune response was sufficient to lead to significantly reduced survival of subsequently injected allo-MSCs. Interestingly, no increased immunogenicity of IFN-γ stimulated allo-MSCs was observed in vivo. Both the loss of protection against cytotoxic lysis under inflammatory conditions and the induction of complement-activating antibodies will likely impact the utility of allogeneic MSCs for therapeutic applications.