The mechanisms underlying the immunomodulatory effects of mesenchymal stem cells (MSCs) have been investigated under extreme conditions of strong T cell activation, which induces the rapid death of activated lymphocytes. The objective of this study was to investigate these mechanisms in the absence of additional polyclonal activation. In co-cultures of peripheral mononuclear blood cells with human MSCs (hereafter referred to as hMSCs), we observed a striking decrease in the level of CD8 expression on CD8+ cells, together with decreased expression of CD28 and CD44, and impaired production of IFN-gamma and Granzyme B. This effect was specific to hMSCs, because it was not observed with several other cell lines. Downregulation of CD8 expression required CD14+ monocytes to be in direct contact with the CD8+ cells, whereas the effects of hMSCs on the CD14+ cells were essentially mediated by soluble factors. The CD14+ monocytes exhibited a tolerogenic pattern when co-cultured with hMSCs, with a clear decrease in CD80 and CD86 co-stimulatory molecules, and an increase in the inhibitory receptors ILT-3 and ILT-4. CD8+ cells that were preconditioned by MSCs had similar effects on monocytes and were able to inhibit lymphocyte proliferation. Injection of hMSCs in humanized NSG mice showed similar trends, in particular decreased levels of CD44 and CD28 in human immune cells. Our study demonstrates a new immunomodulation mechanism of action of hMSCs through the modulation of CD8+ cells towards a non-cytotoxic and/or suppressive phenotype. This mechanism of action has to be taken into account in clinical trials, where it should be beneficial in grafts and autoimmune diseases, but potentially detrimental in malignant diseases.