Decreased levels or function of nucleotide-binding oligomerization domain 2 (NOD2) are associated with Crohn's disease. NOD2 regulates intestinal inflammation, and also is expressed by human umbilical cord blood-derived mesenchymal stem cells (hUCB-MSCs), to regulate their differentiation. We investigated whether NOD2 is required for the anti-inflammatory activities of MSCs in mice with colitis.Colitis was induced in mice by administration of dextran sulfate sodium or trinitrobenzene sulfonic acid. Mice then were given intraperitoneal injections of NOD2-activated hUCB-MSCs; colon tissues and mesenteric lymph nodes were collected for histologic analyses. A bromodeoxyuridine assay was used to determine the ability of hUCB-MSCs to inhibit proliferation of human mononuclear cells in culture.Administration of hUCB-MSCs reduced the severity of colitis in mice. The anti-inflammatory effects of hUCB-MSCs were greatly increased by activation of NOD2 by its ligand, muramyl dipeptide (MDP). Administration of NOD2-activated hUCB-MSCs increased anti-inflammatory responses in colons of mice, such as production of interleukin (IL)-10 and infiltration by T regulatory cells, and reduced production of inflammatory cytokines. Proliferation of mononuclear cells was inhibited significantly by co-culture with hUCB-MSCs that had been stimulated with MDP. MDP induced prolonged production of prostaglandin (PG)E2 in hUCB-MSCs via the NOD2-RIP2 pathway, which suppressed proliferation of mononuclear cells derived from hUCB. PGE2 produced by hUCB-MSCs in response to MDP increased production of IL-10 and T regulatory cells. In mice, production of PGE2 by MSCs and subsequent production of IL-10 were required to reduce the severity of colitis.Activation of NOD2 is required for the ability of hUCB-MSCs to reduce the severity of colitis in mice. NOD2 signaling increases the ability of these cells to suppress mononuclear cell proliferation by inducing production of PGE2.