BACKGROUND: Long-term survival of lung transplantation is hindered by the development of obliterative bronchiolitis (OB). Adipose-derived stem cells (ASCs) were documented to have more potent immunosuppressive ability than mesenchymal stem cells (MSCs) from bone marrow and placenta. The goal of our study is to evaluate the effect of repeated administration of ASCs on OB and the involvement of indoleamine 2,3-dioxygenase (IDO) mediating the protective effect of ASCs in a heterotopic tracheal transplantation (HTT) model. METHODS: For studies in vitro, ASCs were treated with interferon-γ (IFN-γ). For in vivo study, tracheas from BALB/c or C57BL/6 donors were transplanted into C57BL/6 recipients to create a HTT model. On days 0, 1, 3, 5, 8, 12, 15, 20 and 25 post-transplant, the allogeneic recipient mice were administered intravenously with phosphate buffered saline, 1?×?10(6) human ASCs, or 1?×?10(6) human ASCs plus 1-methyltryptophan (1-MT), an IDO inhibitor. On days 3, 7, 14 and 28, serum, trachea and spleen samples were harvested for analysis. RESULTS: ASCs homed to heterotopic tracheal grafts after infusion. Multiple doses of ASCs significantly increased tracheal IDO levels in allografts. There were significant increases in graft and serum IFN-γ levels in allografts compared with isografts. IFN-γ elevated IDO expression and activity in ASCs in vitro. ASCs alleviated OB in allografts as evidenced by reduced epithelial loss, epithelial apoptosis, and intraluminal obstruction. The effects of ASCs on OB were blocked by 1-MT. 1-MT also blocked the alterations in pro and anti-inflammatory cytokines as well as CD3+ T cell infiltration induced by ASCs. ASCs induced not only splenic levels of CD4+CD25+Foxp3+ regulatory T cells (Treg) but also IL-10 and TGF-β-producing Treg. Furthermore, IDO inhibition abolished the changes of splenic Treg induced by ASCs. In addition, Treg reduction by cyclophosphamide treatment did not alter the effects of ASCs on tracheal IDO expression in allografts confirming Treg induction is downstream of IDO. CONCLUSIONS: Repeated doses of ASCs are capable of ameliorating OB. ASCs act at least in part via elevating IDO expression. ASCs promote the generation of Treg and suppress T cell infiltration via an IDO-dependent mechanism.