Bone marrow-derived mesenchymal stem cells (MSCs) exhibit immunosuppressive functions in vitro and in vivo. We investigated the immunoregulatory effects of rat MSCs in a model of allogeneic liver transplantation. Brown Norway rats received livers from inbred Lewis rats, and at designated intervals, infusions of MSCs derived from recipient, donor, or third-party rats. Allograft rejection and recipient survival rates were recorded. In particular, changes in circulating regulatory T cells (Tregs) were measured. After administration of MSCs derived from each of the 3 strains, allograft recipients demonstrated markedly longer survival compared with control animals. Histologic analysis revealed significant inhibition of allograft rejection. The MSCs induced generation of CD4+CD25+Foxp3+ Tregs. We concluded that MSCs inhibit acute rejection of allografts after liver transplantation, and propose that the immunoregulatory effects of MSCs are associated with expansion of Tregs.