Mesenchymal stem cells (MSCs) possess multipotent capacity and exhibit immunoregulatory properties. In particular, MSCs can be easily isolated from various organs, can differentiate into various types of cells and generate regulatory T cells. Using human MSC derived from bone marrow and adipose tissue, we have clarified the following novel findings in vitro. 1) MSCs differentiated into osteoblasts or osteocytes under osteoblast-conditioned medium including the inflammatory stimuli such as IL-1. 2) The combination of IL-6 and soluble IL-6 receptor induced differentiation of MSCs to chondrocyte, whereas IL-17 inhibited their differentiation. 3) MSCs highly produced osteoprotegerin and inhibited osteoclastogenesis. Furthermore, we developed a local delivery system of MSCs by using nano-fiber scaffold. MSCs seeded on nano-fiber scaffold suppressed arthritis and bone destruction due to inhibition of systemic inflammatory reaction and immune response by suppressing T cell proliferation and reducing anti-type II collagen antibody production in vivo. Thus, our data may serve as a new strategy for MSC-based therapy in inflammatory diseases and an alternative delivery method for the treatment of destruction of bone and joints.