Graft versus host disease (GVHD), mediated by donor T cells, is a significant source of morbidity and mortality following allogeneic stem cell transplantation. Mesenchymal stem cells (MSC) can successfully treat ongoing graft versus host disease, presumably due to their ability to suppress donor T cell proliferation. Little is known about the potential of MSC to prevent GVHD. Here we show that bone marrow-isolated MSC can suppress the development of GVHD if given after donor T cell recognition of antigen. IFN-gamma was required to initiate MSC efficacy. Recipients of IFN-gamma(-/-) T cells did not respond to MSC treatment and succumbed to GVHD. MSC, pre-treated with IFN-gamma, became immediately active and could suppress GVHD more efficiently than a fivefold-greater number of MSC that were not activated. When given at the time of bone marrow transplantation, activated MSC could prevent GVHD mortality (100% survival, p=0.006). MSC activation was dependent on the magnitude of IFN-gamma exposure, with increased IFN-gamma exposure leading to increased MSC suppression of GVHD. Activated MSC present a new strategy for preventing GVHD using fewer MSC.