Â© 2015 Cahill et al.; licensee BioMed Central. Introduction: Mesenchymal stromal cells (MSC) have well defined immunomodulatory properties including the suppression of lymphocyte proliferation and inhibition of dendritic cell (DC) maturation involving both cell contact and soluble factors. These properties have made MSC attractive candidates for cellular therapy. However, the mechanism underlying these characteristics remains unclear. This study sought to investigate the mechanisms by which MSC induce a regulatory environment. Method: Allogeneic bone marrow mesenchymal stromal cells were cultured with T cells or dendritic cells in the presence or absence of gamma secretase inhibitor to block Notch receptor signalling. T cells and dendritic cells were examined by flow cytometry for changes in phenotype marker expression. Stable knock down MSC were generated to examine the influence of Jagged 1 signalling by MSC. Both wildtype and knockdown MSC were subsequently used in vivo in an animal model of allergic airway inflammation. Results: The Notch ligand Jagged-1 was demonstrated to be involved in MSC expansion of regulatory T cells (Treg). Additionally, MSC-induced a functional semi-mature DC phenotype, which further required Notch signalling for the expansion of Treg. MSC, but not Jagged-1 knock down MSC, reduced pathology in a mouse model of allergic airway inflammation. Protection mediated by MSC was associated with enhanced Treg in the lung and significantly increased production of interleukin (IL)-10 in splenocytes re-stimulated with allergen. Significantly less Treg and IL-10 was observed in mice treated with Jagged-1 knock down MSC. Conclusions: The current study suggests that MSC-mediated immune modulation involves the education and expansion of regulatory immune cells in a Jagged-1 dependent manner and provides the first report of the importance of Jagged-1 signalling in MSC protection against inflammation in vivo.