The immunomodulatory capacity of mesenchymal stem or stromal cells (MSC) makes them a promising tool for treatment of immune disease and organ transplantation. The effects of MSC on B cells are characterized by an abrogation of plasmablast formation and induction of regulatory B cells (Bregs). It is, however, unknown how MSC interact with B cells under inflammatory conditions. In this study, adipose tissue-derived MSC were pretreated with 50 ng/ml IFN-γ for 96 h (MSC-IFN-γ) to simulate inflammatory conditions. Mature B cells were obtained from spleens by CD43− selection. B cells were co-cultured with MSC and stimulated with anti-IgM, anti-CD40, and IL-2; and after 7 days, B cell proliferation, phenotype, Immunoglobulin-G (IgG), and IL-10 production were analyzed. MSC did not inhibit B cell proliferation but increased the percentage of CD38high CD24high B cells (Bregs) and IL-10 production, while MSC-IFN-γ significantly reduced B cell proliferation and inhibited IgG production by B cells in a more potent fashion but did not induce Bregs or IL-10 production. Both MSC and MSC-IFN-γ required proximity to target cells and being metabolically active to exert their effects. Indoleamine 2,3 dioxygenase expression was highly induced in MSC-IFN-γ and was responsible of the anti-proliferative and Breg reduction since addition of tryptophan (TRP) restored MSC properties. Immunological conditions dictate the effect of MSC on B cell function. Under immunological quiescent conditions, MSC stimulate Breg induction; whereas, under inflammatory conditions, MSC inhibit B cell proliferation and maturation through depletion of TRP. This knowledge is useful for customizing MSC therapy for specific purposes by appropriate pretreatment of MSC.