Human mesenchymal stem cells (hMSCs), including human umbilical cord blood-derived mesenchymal stem cells (hUCB-MSCs), which have high proliferation capacity and immunomodulatory properties, are considered to be a good candidate for cell-based therapies. hMSCs show enhanced therapeutic effects via paracrine secretion or cell-to-cell contact that modulates inflammatory or immune reactions. Here, treatment with cobalt chloride (CoCl2) was more effective than naïve hUCB-MSCs in suppressing inflammatory responses in a coculture system with phytohemagglutinin- (PHA-) activated human peripheral blood mononuclear cells (hPBMCs). Furthermore, the effect of CoCl2 is exerted by promoting the expression of anti-inflammatory mediators (e.g., PGE2) and inhibiting that of inflammatory cytokines (e.g., TNF-α and IFN-γ). Treatment of hUCB-MSCs with CoCl2 leads to increased expression of microRNA- (miR-) 146a, which was reported to modulate anti-inflammatory responses. Hypoxia-inducible factor- (HIF-) 1α silencing and ERK inhibition abolished CoCl2-induced miR-146a expression, suggesting that ERK and HIF-1α signals are required for CoCl2-induced miR-146a expression in hUCB-MSCs. These data suggest that treatment with CoCl2 enhances the immunosuppressive capacity of hUCB-MSCs through the ERK-HIF-1α-miR-146a-mediated signaling pathway. Furthermore, pretreatment of transplanted MSCs with CoCl2 can suppress lung inflammation more than naïve MSCs can in a mouse model of asthma. These findings suggest that CoCl2 may improve the therapeutic effects of hUCB-MSCs for the treatment of inflammatory diseases.