Mesenchymal stem cells (MSCs) have profound immunomodulatory functions both in vitro and in vivo. However, their effects on the differentiation of dendritic cells (DCs) are unknown. In this study, we employed an in vitro model to investigate the effects of human MSCs on the development of DCs. CD34(+) cells isolated from cord blood were cultured under conventional DC(cDC) or plasmacytoid DC (pDC) differentiation conditions, in the presence or absence of MSCs or their conditioned medium. Here we show that both MSCs and their conditioned medium dramatically increased the numbers of cells generated under either condition. The percentage of cells with the cDC phenotype is significantly reduced in the presence of MSCs or their conditioned medium, whereas the percentage of pDC increased. The capacity of cDCs from MSCs or their conditioned medium-treated CD34(+) cells to stimulate allogeneic T cells was weakened. Furthermore, MSCs can skew the DC function from cDC to pDC, thus biasing the immune system toward Th2 and away from Th1 responses. Blocking the prostaglandin E(2) (PGE(2)) synthesis of MSCs can reverse most of these influences of MSCs on DCs differentiation and function. Therefore, MSCs can significantly influence DC development through PGE(2) production.