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Background and Objective: Umbilical cord (UC)-derived mesenchymal stem cells (MSCs) have shown immunoregulation of various immune cells. The aim of this study was to investigate the mechanism of UC MSCs in the regulation of peripheral regulatory T cells (Treg) and T helper 17 (Th17) cells in patients with systemic lupus erythematosus (SLE)., Methods: Thirty patients with active SLE, refractory to conventional therapies, were given UC MSCs infusions. The percentages of peripheral blood CD4+CD25+Foxp3+ regulatory T cells (Treg) and CD3+CD8-IL17A+ Th17 cells and the mean fluorescence intensities (MFI) of Foxp3 and IL-17 were measured at 1 week, 1 month, 3 months, 6 months, and 12 months after MSCs transplantation (MSCT). Serum cytokines, including transforming growth factor beta (TGF-β), tumor necrosis factor alpha (TNF-α), interleukin 6 (IL-6), and IL-17A were detected using ELISA. Peripheral blood mononuclear cells from patients were collected and co-cultured with UC MSCs at ratios of 1:1, 10:1, and 50:1, respectively, for 72 h to detect the proportions of Treg and Th17 cells and the MFIs of Foxp3 and IL-17 were determined by flow cytometry. The cytokines in the supernatant solution were detected using ELISA. Inhibitors targeting TGF-β, IL-6, indoleamine 2,3-dioxygenase (IDO), and prostaglandin E2 were added to the co-culture system, and the percentages of Treg and Th17 cells were observed., Results: The percentage of peripheral Treg and Foxp3 MFI increased 1 week, 1 month, and 3 months after UC MSCs transplantation, while the Th17 proportion and MFI of IL-17 decreased 3 months, 6 months, and 12 months after the treatment, along with an increase in serum TGF-β at 1 week, 3 months, and 12 months and a decrease in serum TNF-α beginning at 1 week. There were no alterations in serums IL-6 and IL-17A before or after MSCT. In vitro studies showed that the UC MSCs dose-dependently up-regulated peripheral Treg proportion in SLE patients, which was not depended on cell-cell contact. However, the down-regulation of Th17 cells was not dose-dependently and also not depended on cell-cell contact. Supernatant TGF-β and IL-6 levels significantly increased, TNF-α significantly decreased, but IL-17A had no change after the co-culture. The addition of anti-TGF-β antibody significantly abrogated the up-regulation of Treg, and the addition of PGE2 inhibitor significantly abrogated the down-regulation of Th17 cells. Both anti-IL-6 antibody and IDO inhibitor had no effects on Treg and Th17 cells., Conclusions: UC MSCs up-regulate Treg and down-regulate Th17 cells through the regulation of TGF-β and PGE2 in lupus patients.