IL-17 is one of the most potent and most actively investigated proinflammatory cytokines. In this study, we examined the effect of IL-17 on mesenchymal stem cells (MSCs) under the influence of inflammatory cytokines. Ironically, IL-17 dramatically enhanced the immunosuppressive effect of MSCs induced by IFNγ and TNFα, revealing a novel role of IL-17 in immunosuppression. Interestingly, we found that this action of IL-17 was dependent on the promoted expression of a key immune suppressive molecule, inducible nitric oxide synthase (iNOS), in MSCs. In a concanavalin A (ConA)-induced hepatitis mouse model, we found that IL-17 also enhanced the in vivo immunosuppressive effect of MSCs in an iNOS-dependent manner. Moreover, this promoting effect of IL-17 was found to be exerted through enhancing mRNA stability by modulating the protein level of ARE/poly(U)-binding/degradation factor 1 (AUF1), a well-known factor that promotes mRNA decay. In auf1(-/-) MSCs, IFNγ and TNFα could induce maximal immunosuppressive effect, both in vitro and in vivo, without the need for IL-17. Thus, our studies demonstrated that in the presence of MSCs, IL-17 promotes immunosuppression.