Bone marrow mesenchymal stem cells (MSCs) have been shown to have immune modulatory effects. Despite efforts to identify these cells in vivo, to date, MSCs have been defined mainly by their in vitro cell characteristics. Here, we show that Lin(-)CD44(hi)Sca1(-)cKit+CD34(-) cells make up approximately 0.5%-1% of murine whole bone marrow cells and yield nearly an equal amount of fibroblastic colony-forming units (CFU-F) as whole bone marrow. After transplantation into lethally irradiated recipients, Lin(-)CD44(hi)Sca1(-)cKit+CD34(-) cells engrafted in the bone marrow long-term and demonstrated characteristics of MSCs, including capacity to differentiate into osteoblasts and adipocytes. To examine whether Lin(-)CD44(hi)Sca1(-)cKit+CD34(-) cells have immune modulatory effects, in vitro coculture with activated CD4+ T-cells resulted in decreased Th17 cell differentiation by Lin(-)CD44(hi)Sca1(-)cKit+CD34(-) cells. Furthermore, serial infusions with Lin(-)CD44(hi)Sca1(-)cKit+CD34(-) cells reduced the progression to low-grade gastric dysplasia in mice infected with chronic Helicobacter felis (p = .038). This correlated with reduced gastric interleukin (IL)-17F, IL-22, and ROR-gammat gene expression in responding mice (p < .05). These data suggest that bone marrow derived Lin(-)CD44(hi)Sca1(-)cKit+CD34(-) cells have characteristics of MSCs and reduce progression of early gastric tumorigenesis induced by chronic H. felis infection. The prevention of dysplastic changes may occur through inhibition of Th17-dependent pathways.