Chorion trophoblasts (CTCs) and immune cell-enriched decidua (DECs) comprise the maternal-fetal membrane interface called the chorio-decidual interface (CDi) which constantly gets exposed to maternal stressors without leading to labor activation. This study explored how CTCs act as a barrier at CDi. The roles of human leukocyte antigen (HLA)-G and progesterone receptor membrane component 2 (PGRMC2) in mediating immune homeostasis were also investigated. The CDi was recreated in a two-chamber microfluidic device (CDi-on-chip) with an outer chamber of primary DECs and immune cell line-derived innate immune cells and an inner chamber of wild-type or PGRMC2 or HLA-G knockout immortalized CTCs. To mimic maternal insults, DECs were treated with lipopolysaccharide, poly(I:C), or oxidative stress inducer cigarette smoke extract. Expression levels of inflammation and immunity genes via targeted RNA sequencing, production of soluble mediators, and immune cell migration into CTCs were determined. In CDi-on-chip, decidua and immune cells became inflammatory in response to insults while CTCs were refractory, highlighting their barrier function. HLA-G and PGRMC2 are found to be vital to immune homeostasis at the CDi, with PGRMC2 serving as an upstream regulator of inflammation, HLA-G expression, and mesenchymal-epithelial transition, and HLA-G serving as a frontline immunomodulatory molecule, thus preventing fetal membrane compromise.