Recent studies have reported that mesenchymal stromal cells (MSCs) migrate to areas of inflammation and suppress adverse immune reactions. Bone marrow (BM)-derived MSCs have been successfully used in patients with acute graft versus host disease (GVHD), but the harvesting of BM carries certain risks for the donor. To circumvent these, we obtained MSCs from Wharton’s jelly (WJ) derived from umbilical cord and investigated their potential for immunosuppression. In a mixed lymphocyte reaction (MLR), responder T cell proliferation triggered by allogeneic dendritic cells was inhibited efficiently by WJ-MSCs derived from the same donor of responder cells or those from a third party donor. These inhibitory effects were reversed in a dose-dependent manner in the presence of 1-methyl-DL-tryptophan, an inhibitor of the soluble factor indoleamine 2, 3-dioxygenase (IDO). Immunosuppression by WJ-MSCs was also attenuated by blocking cell–cell contact between WJ-MSCs and responder T cells using a Transwell chamber. Moreover, IDO gene expression was induced in both WJ- and BM-MSCs by inflammatory cytokine IFN-γ, but HLA-DR was expressed in BM-MSCs and not in WJ-MSCs upon stimulation by a relatively low concentration of IFN-γ. These results indicate that WJ-MSCs exert their immunosuppressive effects by cell–cell contact with activated T cells and in part through IDO, and suggest the need for cells rather than soluble factors secreted from MSCs to achieve immunosuppressive therapy in severe cases of GVHD. © 2015, The Japanese Society of Hematology.