The therapeutic applications of mesenchymal stem cells (MSCs) have been actively explored due to their broad anti-inflammatory and immunomodulatory properties. However, the use of xenogeneic components, including fetal bovine serum (FBS), in the expansion media might pose a risk of xenoimmunization and zoonotic transmission to post-transplanted patients. Here, we extensively compared the physiological functions of human Wharton鈥檚 jelly-derived MSCs (WJ-MSCs) in a xeno-free medium (XF-MSCs) and a medium containing 10% FBS (10%-MSCs). Both groups showed similar proliferation potential; however, the 10%-MSCs showed prolonged expression of CD146, with higher colony-forming unit-fibroblast (CFU-F) ability than the XF-MSCs. The XF-MSCs showed enhanced adipogenic differentiation potential and sufficient hematopoietic stem cell (HSC) niche activity, with elevated niche-related markers including CXCL12. Furthermore, we demonstrated that the XF-MSCs had a significantly higher suppressive effect on human peripheral blood-derived T cell proliferation, Th1 and Th17 differentiation, as well as na茂ve macrophage polarization toward an M1 phenotype. Among the anti-inflammatory molecules, the production of indoleamine 2,3-dioxygenase (IDO) and nitric oxide synthase 2 (NOS2) was profoundly increased, whereas cyclooxygenase-2 (COX-2) was decreased in the XF-MSCs. Finally, the XF-MSCs had an enhanced therapeutic effect against mouse experimental colitis. These findings indicate that xeno-free culture conditions improved the immunomodulatory properties of WJ-MSCs and ex vivo-expanded XF-MSCs might be an effective strategy for preventing the progression of colitis.