Immune-mediated hematopoietic destruction is a key factor in idiopathic severe aplastic anemia (SAA). With great immunomodulatory functions, mesenchymal stem cells (MSCs) are important for bone marrow niche. While the underlying etiology of immunologic changes in SAA bone marrow remains unknown, dysfunctional MSCs are implicated as a major cause. To provide evidence for their defects in immunomodulation, alterations of SAA MSCs in regulating T cell differentiation were determined. During differentiation from CD4+ T cells into T helper 17 (Th17) cells under polarization conditions, impaired inhibition on IL-17 and IL-1β production was noted when cocultured with SAA MSCs compared to control MSCs (P < 0.05). After stimulation of Th17 activation, the percentage of IL-17-secreting cells was significantly increased in the SAA group (9.1 ± 1.5% vs 6.6 ± 0.4%, P < 0.01). Under regulatory T (Treg) polarization, a higher percentage of CD4+CD25+FoxP3+ Treg cells was detected when cocultured with SAA MSCs compared to control MSCs (8.1 ± 0.5% vs 5.8 ± 0.8%, P < 0.01). Inconsistently, transforming growth factor-β (TGF-β) concentrations in the culture supernatant were decreased and IL-1β concentrations were elevated in the SAA group. Our data indicated impaired inhibition of SAA MSCs on Th17 activation and aberrant regulation of SAA MSCs on Treg differentiation. Increased IL-17 and IL-1β levels with decreased TGF-β levels in the supernatant suggested the potential of SAA MSCs for triggering a hyperinflammatory environment. Dysfunctional MSCs could contribute to the lack of immunoprotection in the bone marrow, which may be associated with SAA.Keywords: aplastic anemia; bone marrow failure; immunomodulation; mesenchymal stem cells.