Human clinical trials in type 1 diabetes (T1D) patients using mesenchymal stem cells (MSC) are presently underway without prior validation in a mouse model for the disease. In response to this void, we characterized bone marrow-derived murine MSC for their ability to modulate immune responses in the context of T1D, as represented in NOD mice. In comparison to NOD mice, BALB/c-MSC mice were found to express higher levels of the negative costimulatory molecule PD-L1 and to promote a shift toward Th2-like responses in treated NOD mice. In addition, transfer of MSC from resistant strains (i.e., nonobese resistant mice or BALB/c), but not from NOD mice, delayed the onset of diabetes when administered to prediabetic NOD mice. The number of BALB/c-MSC trafficking to the pancreatic lymph nodes of NOD mice was higher than in NOD mice provided autologous NOD-MSC. Administration of BALB/c-MSC temporarily resulted in reversal of hyperglycemia in 90% of NOD mice (p = 0.002). Transfer of autologous NOD-MSC imparted no such therapeutic benefit. We also noted soft tissue and visceral tumors in NOD-MSC-treated mice, which were uniquely observed in this setting (i.e., no tumors were present with BALB/c- or nonobese resistant mice-MSC transfer). The importance of this observation remains to be explored in humans, as inbred mice such as NOD may be more susceptible to tumor formation. These data provide important preclinical data supporting the basis for further development of allogeneic MSC-based therapies for T1D and, potentially, for other autoimmune disorders.