Mesenchymal stromal cells (MSCs) are strongly immunosuppressive via producing nitric oxide (NO) and known to migrate into tumor sites to promote tumor growth, but the underlying mechanisms remain largely elusive. Here, we found that interferon alpha (IFNα)-secreting MSCs showed more dramatic inhibition effect on tumor progression than that of IFNα alone. Interestingly, IFNα-primed MSCs could also effectively suppress tumor growth. Mechanistically, we demonstrated that both IFNα and IFNβ (type I IFNs) reversed the immunosuppressive effect of MSCs on splenocyte proliferation. This effect of type I IFNs was exerted through inhibiting inducible NO synthase (iNOS) expression in IFNγ and TNFα-stimulated MSCs. Notably, only NO production was inhibited by IFNα; production of other cytokines or chemokines tested was not suppressed. Furthermore, IFNα promoted the switch from signal transducer and activator of transcription 1 (Stat1) homodimers to Stat1-Stat2 heterodimers. Studies using the luciferase reporter system and chromatin immunoprecipitation assay revealed that IFNα suppressed iNOS transcription through inhibiting the binding of Stat1 to iNOS promoter. Therefore, the synergistic anti-tumor effects of type I IFNs and MSCs were achieved by inhibiting NO production. This study provides essential information for understanding the mechanisms of MSC-mediated immunosuppression and for the development of better clinical strategies using IFNs and MSCs for cancer immunotherapy.