Umbilical cord matrix or Wharton's jelly-derived stromal cells (WJ-MSCs) are an easily accessible source of mesenchymal-like stem cells. Recent studies describe a hypoimmunogenic phenotype, multipotent differentiation potential, and trophic support function for WJ-MSCs, with variable clinical benefit in degenerative disease models such as stroke, myocardial infarction, and Parkinson's disease. It remains unclear whether WJ-MSCs have therapeutic value for multiple sclerosis (MS), where autoimmune-mediated demyelination and neurodegeneration need to be halted. In this study, we investigated whether WJ-MSCs possess the required properties to effectively and durably reverse these pathological hallmarks and whether they survive in an inflammatory environment after transplantation. WJ-MSCs displayed a lowly immunogenic phenotype and showed intrinsic expression of neurotrophic factors and a variety of anti-inflammatory molecules. Furthermore, they dose-dependently suppressed proliferation of activated T cells using contact-dependent and paracrine mechanisms. Indoleamine 2,3-dioxygenase 1 was identified as one of the main effector molecules responsible for the observed T-cell suppression. The immune-modulatory phenotype of WJ-MSCs was further enhanced after proinflammatory cytokine treatment in vitro (licensing). In addition to their effect on adaptive immunity, WJ-MSCs interfered with dendritic cell differentiation and maturation, thus directly affecting antigen presentation and therefore T-cell priming. Systemically infused WJ-MSCs potently but transiently ameliorated experimental autoimmune encephalomyelitis (EAE), an animal model for MS, when injected at onset or during chronic disease. This protective effect was paralleled with a reduction in autoantigen-induced T-cell proliferation, confirming their immunomodulatory activity in vivo. Surprisingly, in vitro licensed WJ-MSCs did not ameliorate EAE, indicative of a fast rejection as a result of enhanced immunogenicity. Collectively, we show that WJ-MSCs have trophic support properties and effectively modulate immune cell functioning both in vitro and in the EAE model, suggesting WJ-MSC may hold promise for MS therapy. Future research is needed to optimize survival of stem cells and enhance clinical durability.