Purpose: Osteoarthritis (OA), typically characterised by the progressive destruction of articular cartilage, is now understood to be a degenerative disease of the entire joint. Inflammation of the synovium is a key feature of OA, linked to several clinical symptoms and the disease progression. Human synovium harbours macrophages and T-cells that secrete inflammatory cytokines, stimulating chondrocytes to release proteinases like aggrecanases and matrix metalloproteinases(MMPs) during the development of OA. Current OA treatments may provide symptomatic relief but at present there are no approved disease-modifying interventions either pharmacologic or biologic which modify the disease state or prevent the progressive destruction of the osteoarthritic joint. As a prelude to testing in an OA mouse model, we have used the tetracycline system (Tet) to modify mouse mesenchymal stem cells (mMSCs) to over-express viral interleukin 10 (vIL10), an anti-inflammatory cytokine, to modulate the osteoarthritic environment and prevent disease development. The study aims to induce vIL10 release by adenoviral (Ad) transduction of mMSCs using Tet, and demonstrate immune modulation of activated macrophages and T cells. Methods: MSCs were isolated from the marrow of C57BL6/J mice and transduced with Ads carrying CMVIL10 and TetON as test, and untransduced, AdNull and TetOFF as negative controls. The cells were tested for their growth potential, differentiation capacity (osteogenic, adipogenic and chondrogenic assays), expression of MSC markers (CD90.2, SCA-1, CD105, CD140a, CD34, CD45 and CD11b) by flow cytometry (FCM) and production of vIL10 by ELISA. FCM characterisation of bone-marrow derived macrophages (BMDMs) was performed to show expression of CD45, F4/80 and CD11b, followed by subsequent activation by lipopolysaccharide in the presence or absence of various MSC conditioned medium(CM) on activated macrophages. ELISA quantified the release of pro- and anti-inflammatory cytokines and Griess assay was performed to assess the quantities of nitrate/nitrite released. RNA was isolated from MSC CM treated macrophages and a quantitative real-time PCR array was performed to analyse the gene expression of 84 different mouse pro-inflammatory cytokine and chemokine genes. Co-culture of stimulated macrophages and T cells with MSCs was also performed, followed by detection of macrophage polarisation status by quantifying MHC-II and CD206 and T-cell proliferation status in terms of percentage of CD4+ and CD8+cells by FCM. Finally, LPS treated macrophages were fixed and stained for anti-mouse CD68 (M1) and CD206 (M2) antibodies and immunofluorescence (IF) microscopy imaging was performed with DAPI as the nuclear counterstain. Results: MSCs proved to maintain their viability above 80% and growth potential over 3 doublings in a span of 72h post transduction. Efficient and tightly controlled vIL10 production was demonstrated by CMVIL10 and TetON MSCs. The cells expressed all positive markers that define mouse MSCs and differentiated into all three mesenchymal lineages. Co-incubation of vIL10MSC CM with activated macrophages resulted in reduction of TNF-α, IL-6 levels and elevated production of IL-10 by ELISA and high iNOS release by Griess assay. Co-culture of splenocytes with MSCs resulted in inhibition of both CD4+ and CD8+ T cell proliferation with maximal reduction seen with TetON MSCs. Macrophage polarisation from M1 to M2 phase was demonstrated by activated macrophages, co-cultured with TetON MSCs and by elevated expression of CD206 with IF staining. The PCR profiler array also showed changes in gene expression of critical pro-inflammatory cytokines involved in the TLR4 pathway. Conclusions: vIL10MSCs proved to be immuno-regulatory on both macrophages and T cells. The biscistronic TetON transduced MSCs proved to be most immuno-suppressive proving the hypothesis. TetON MSCs are therefore feasible as efficient anti-inflammatory therapy that can utilised in vivo.