Mesenchymal stromal cells (MSCs) have shown great potential for treating inflammatory bowel disease, which is ameliorated through paracrine cross talk between MSCs and T-cells. Members of the insulin-like growth factor binding protein (IGFBP) family have important immunomodulatory functions in MSCs, but the underlying mechanisms behind these functions have not yet been clearly elucidated. In this study, we investigate whether MSC-produced IGFBP7 is involved in immune modulation using a mouse experimental colitis model. Gene expression profiling revealed that IGFBP7 was highly expressed in MSCs. Consistent with this findings, IGFBP7 knockdown in MSCs significantly decreased their immunomodulatory properties, decreasing the antiproliferative functions of MSCs against T-cells, while also having an effect on the proinflammatory cytokine production of the T-cells. Furthermore, in the mouse experimental colitis model, MSC-derived IGFBP7 ameliorated the clinical and histopathological severity of induced colonic inflammation and also restored the injured gastrointestinal mucosal tissues. In conclusion, IGFBP7 contributes significantly to MSC-mediated immune modulation, as is shown by the ability of IGFBP7 knockdown in MSCs to restore proliferation and cytokine production in T-cells. These results suggest that IGFBP7 may act as a novel MSC-secreted immunomodulatory factor.