The immunomodulatory properties of multilineage human mesenchymal stem cells (MSCs) appear to be highly relevant for clinical use towards a wide-range of immune-related diseases. Mechanisms involved are increasingly being elucidated and in this article, we describe the basic experiment to assess MSC immunomodulation by assaying for suppression of effector leukocyte proliferation. Representing activation, leukocyte proliferation can be assessed by a number of techniques, and we describe in this protocol the use of the fluorescent cellular dye carboxyfluorescein succinimidyl ester (CFSE) to label leukocytes with subsequent flow cytometric analyses. This technique can not only assess proliferation without radioactivity, but also the number of cell divisions that have occurred as well as allowing for identification of the specific population of proliferating cells and intracellular cytokine/factor expression. Moreover, the assay can be tailored to evaluate specific populations of effector leukocytes by magnetic bead surface marker selection of single peripheral blood mononuclear cell populations prior to co-culture with MSCs. The flexibility of this co-culture assay is useful for investigating cellular interactions between MSCs and leukocytes.