Interleukin (IL)‐1 receptor antagonist (IL‐1Ra), a naturally occurring antagonist of IL‐1α/IL‐1β signaling pathways, has been attributed to the immunosuppressive effects of mesenchymal stem cells (MSCs). MSCs, in IL‐1Ra‐dependent manner, suppressed production of IL‐1β in dermal macrophages, induced their polarization in anti‐inflammatory M2 phenotype, attenuated antigen‐presenting properties of dendritic cells (DCs), and promoted expansion of immunosuppressive T regulatory cells in the skin, which resulted in enhanced repair of the nonhealing wounds. Reduced activation of inflammasome and suppressed production of IL‐1β in macrophages were mainly responsible for beneficial effects of MSC‐derived IL‐1Ra in alleviation of acute lung injury, dry eye syndrome, and corneal injury. Through the production of IL‐1Ra, MSCs reduced migration of DCs to the draining lymph nodes and attenuated generation of inflammatory Th1 and Th17 cells that resulted in alleviation of fulminant hepatitis and rheumatoid arthritis. MSCs, in IL‐1Ra‐dependent manner, reduced liver fibrosis by suppressing production of Type I collagen in hepatic stellate cells. IL‐1Ra was, at least partially, responsible for enhanced proliferation of hepatocytes and chondrocytes in MSC‐treated animals with partial hepatectomy and osteoarthritis. Despite of these beneficial effects, IL‐1Ra‐dependent inhibition of IL‐1α/IL‐1β‐signaling significantly increased risk of infections. Therefore, future experimental and clinical studies should delineate potential side effects of MSC‐derived IL‐1Ra before IL‐1Ra‐overexpressing MSCs could be used as a potentially new therapeutic agent for the treatment of acute and chronic inflammatory diseases.