Human adipose-derived mesenchymal stem cells (hASCs) are mesenchymal stem cells (MSCs) with reduced immunogenicity and capability to modulate immune responses. Whereas the immunosuppressive activity of bone marrow-MSCs has received considerable attention during the last few years, the specific mechanisms underlying hASC-mediated immunosuppression have been poorly studied. Recent studies comparing both cell types have reported differences at transcriptional and proteomic levels, suggesting that hASCs and bone marrow-MSCs, while having similarities, are quite different. This suggests that different mechanisms of immunosuppression may apply. Here, we report that hASCs inhibit peripheral blood mononuclear cells (PBMCs), and CD4(+) and CD8(+) T cell proliferation in both cell-cell contact and transwell conditions, which is accompanied by a reduction of proinflammatory cytokines. We demonstrate that hASCs do not constitutively express immunomodulatory factors. Conditioned supernatants from hASCs stimulated by IFN-gamma, PBMCs, or activated PBMCs highly inhibited PBMC proliferation, indicating that inhibitory factors are released upon hASC activation. Many factors have been involved in MSC-mediated immunosuppression, including IFN-gamma, IL-10, hepatocyte growth factor, prostaglandin E2, transforming growth factor-beta1, indoleamine 2,3-dioxygenase (IDO), nitric oxide, and IL-10. Using pharmacological inhibitors, neutralizing antibodies, and genetically modified hASCs that constitutively express or silence IDO enzyme, we demonstrate that, in the case of hASCs, the IFN-gamma/IDO axis is essential. Taken together, our data support the key role of IDO in the therapeutic use of hASC on immunomediated diseases.