Development of allograft rejection continues to be the major determinant of morbidity and mortality postlung transplantation. We have recently demonstrated that a population of donor-derived mesenchymal stem cells is present in human lung allografts and can be isolated and expanded ex vivo. In this study, we investigated the impact of lung resident mesenchymal stem cells (LR-MSCs), derived from allografts of human lung transplant recipients, on T cell activation in vitro. Similar to bone marrow-derived MSCs, LR-MSCs did not express MHC II or the costimulatory molecules CD80 or CD86. In vitro, LR-MSCs profoundly suppressed the proliferative capacity of T cells in response to a mitogenic or an allogeneic stimulus. The immunosuppressive function of LR-MSCs was also noted in the absence of direct cell contact, indicating that LR-MSCs mediated their effect predominantly via a soluble mediator. LR-MSCs isolated from lung transplant recipients demonstrated PGE(2) secretion at baseline (385 +/- 375 pg/ml), which increased in response to IL-1beta (1149 +/- 1081 pg/ml). The addition of PG synthesis inhibitors (indomethacin and NS-398) substantially abrogated LR-MSC-mediated immunosuppression, indicating that PGE(2) may be one of the major soluble mediators impacting T cell activity. This is the first report to demonstrate that human tissue-derived MSCs isolated from an allogeneic environment have the potential to mediate immunological responses in vitro.