Administering local anesthetics (LAs) peri- and post-operatively aims to prevent or mitigate pain in surgical procedures and after tissue injury in cases of osteoarthritis (OA) and other degenerative diseases. Innovative tissue protective and reparative therapeutic interventions such as mesenchymal stromal cells (MSCs) are likely to be exposed to co-administered drugs such as LAs. Therefore, it is important to determine how this exposure affects the therapeutic functions of MSCs and other cells in their target microenvironment. In these studies, we measured the effect of LAs, lidocaine and bupivacaine, on macrophage viability and pro-inflammatory secretion. We also examined their effect on modulation of the macrophage pro-inflammatory phenotype in an in vitro co-culture system with MSCs, by quantifying macrophage tumor necrosis factor (TNF)-α secretion and MSC prostaglandin E2 (PGE2) production. Our studies indicate that both LAs directly attenuated macrophage TNF-α secretion, without significantly affecting viability, in a concentration- and potency-dependent manner. LA-mediated attenuation of macrophage TNF-α was sustained in co-culture with MSCs, but MSCs did not further enhance this anti-inflammatory effect. Concentration- and potency-dependent reductions in macrophage TNF-α were concurrent with decreased PGE2 levels in the co-cultures further indicating MSC-independent macrophage attenuation. MSC functional recovery from LA exposure was assessed by pre-treating MSCs with LAs prior to co-culture with macrophages. Both MSC attenuation of TNF-α and PGE2 secretion were impaired by pre-exposure to the more potent bupivacaine and high dose of lidocaine in a concentration-dependent manner. Therefore, LAs can affect anti-inflammatory function by both directly attenuating macrophage inflammation and MSC secretion and possibly by altering the local microenvironment which can secondarily reduce MSC function. Furthermore, the LA effect on MSC function may persist even after LA removal.