Because human mesenchymal stem cells (hMSC) have profound immunomodulatory effects, many attempts have been made to use hMSCs in preclinical and clinical trials. For hMSCs to be used in therapy, a large population of hMSCs must be generated by in vitro expansion. However, the immunomodulatory changes following the in vitro expansion of hMSCs have not been elucidated. In this study, we evaluated the effect of replicative senescence on the immunomodulatory ability of hMSCs in vitro and in vivo. Late-passage hMSCs showed impaired suppressive effect on mitogen-induced mononuclear cell proliferation. Strikingly, late-passage hMSCs had a significantly compromised protective effect against mouse experimental colitis, which was confirmed by gross and histologic examination. Among the anti-inflammatory cytokines, the production of prostaglandin E2 (PGE2) and the expression of its primary enzyme, cyclooxygenase-2 (COX-2), were profoundly increased by pre-stimulation with interferon gamma (IFN-γ) and tumor necrosis factor alpha (TNF-α), and this response was significantly decreased with consecutive passages. We demonstrated that the impaired phosphorylation activity of p38 MAP kinase (p38 MAPK) in late-passage hMSCs led to a compromised immunomodulatory ability through the regulation of COX-2. In conclusion, our data indicate that the immunomodulatory ability of hMSCs gradually declines with consecutive passages via a p38-mediated alteration of COX-2 and PGE2 levels.