Mesenchymal stem cells (MSCs) have potential to differentiate into multiple cell lineages. Recently, it was shown that MSCs also have anti-inflammatory and immunomodulatory functions. In this report, we investigated the regulatory function of MSCs in the development of inflammatory bone destruction in rats with adjuvant-induced arthritis (AA rats). MSCs were isolated from rat bone marrow tissues, expanded in the presence of basic FGF, and intraperitoneally injected into AA rats. MSC administration significantly suppressed inflammatory parameters: swelling score, swelling width, and thickness of hind paw. Radiographic evaluation indicated that MSC significantly suppressed bone destruction. Histological analysis showed that administration of MSCs markedly suppressed osteoclastogenesis in AA rats. To further delineate their effects on osteoclastogenesis, MSCs were added to in vitro bone marrow cultures undergoing osteoclastogenesis. MSCs significantly suppressed osteoclastogenesis in this system. Chemokine receptor expression in MSCs was assessed by RT-PCR, and a chemotactic assay was performed using a transwell culture system. MSCs showed significant chemotaxis to MIP-1α (CCL3) and SDF-1α (CXCL12), chemokines preferentially expressed in the area of inflammatory bone destruction. Furthermore, MSCs expressed IL-10 and osteoprotegerin, cytokines that suppress osteoclastogenesis. These data suggest that recruitment of MSC to the area of bone destruction in AA rats could suppress inflammatory bone destruction and raise the possibility that MSCs may have potential for the treatment of inflammatory bone destruction in arthritis.