Clinical trials testing the use of either autologous or allogeneic human bone marrow-derived mesenchymal stromal cells (MSC) as a cell-based pharmaceutical for suppression of autoimmune and alloimmune ailments are underway. Reported results from completed trials vary in effectiveness within and between studies without any clear mechanistic explanation. We propose that these discrepancies may arise from intrinsic variability in the immunosuppressive potential of each MSC donor source. Here, we demonstrate that tumor necrosis factor-α (TNF-α) and interferon-γ (IFN-γ)-activated MSC derived from normal adult volunteers suppress T cell proliferation in vitro in a variegated manner, an observation linked to IFN-mediated indoleamine 2,3-dioxygenase (IDO) upregulation. We also demonstrate that MSC IDO activity is implicated in the differentiation of monocytes into interleukin (IL)-10-secreting M2 immunosuppressive macrophages (CD14⁺/CD206⁺). Those monocyte-derived M2 are in turn implicated in the suppression of T cell proliferation in an IL-10-independent manner, thus amplifying the immunosuppressive effect generated by MSC. In summary, the immune plasticity of IFN-γ and TNF-α licensed veto function of MSC vary among donors and defines a central role to inducible IDO activity and its bystander effect on lymphomyeloid immune effectors.