Tolerogenic　dendritic　cells　(tolDCs)　facilitate　the　suppression　of　autoimmune　responses　by　differentiating　regulatory　T　cells　(Treg).　The　dysfunction　of　immunotolerance　results　in　the　development　of　autoimmune　diseases,　such　as　rheumatoid　arthritis　(RA).　As　multipotent　progenitor　cells,　mesenchymal　stem　cells　(MSCs),　can　regulate　dendritic　cells　(DCs)　to　restore　their　immunosuppressive　function　and　prevent　disease　development.　However,　the　underlying　mechanisms　of　MSCs　in　regulating　DCs　still　need　to　be　better　defined.　Simultaneously,　the　delivery　system　for　MSCs　also　influences　their　function.　Herein,　MSCs　are　encapsulated　in　alginate　hydrogel　to　improve　cell　survival　and　retention　in　situ,　maximizing　efficacy　in　vivo.　The　three-dimensional　co-culture　of　encapsulated　MSCs　with　DCs　demonstrates　that　MSCs　can　inhibit　the　maturation　of　DCs　and　the　secretion　of　pro-inflammatory　cytokines.　In　the　collagen-induced　arthritis　(CIA)　mice　model,　alginate　hydrogel　encapsulated　MSCs　induce　a　significantly　higher　expression　of　CD39+CD73+　on　MSCs.　These　enzymes　hydrolyze　ATP　to　adenosine　and　activate　A2A/2B　receptors　on　immature　DCs,　further　promoting　the　phenotypic　transformation　of　DCs　to　tolDCs　and　regulating　naïve　T　cells　to　Tregs.　Therefore,　encapsulated　MSCs　obviously　alleviate　the　inflammatory　response　and　prevent　CIA　progression.　This　finding　clarifies　the　mechanism　of　MSCs-DCs　crosstalk　in　eliciting　the　immunosuppression　effect　and　provides　insights　into　hydrogel-promoted　stem　cell　therapy　for　autoimmune　diseases.　©　2023　Chinese　Pharmaceutical　Association　and　Institute　of　Materia　Medica,　Chinese　Academy　of　Medical　Sciences