Multipotent mesenchymal stromal cells (MSCs) ameliorate a wide range of diseases in preclinical models, but the lack of clarity around their mechanisms of action has impeded their clinical utility. The therapeutic effects of MSCs are often attributed to bioactive molecules secreted by viable MSCs. However, we found that MSCs underwent apoptosis in the lung after intravenous administration, even in the absence of host cytotoxic or alloreactive cells. Deletion of the apoptotic effectors BAK and BAX prevented MSC death and attenuated their immunosuppressive effects in disease models used to define MSC potency. Mechanistically, apoptosis of MSCs and their efferocytosis induced changes in metabolic and inflammatory pathways in alveolar macrophages to effect immunosuppression and reduce disease severity. Our data reveal a mode of action whereby the host response to dying MSCs is key to their therapeutic effects; findings that have broad implications for the effective translation of cell-based therapies.