This study investigates molecular and cellular mechanisms involved in mesenchymal stem cell (MSC)‐mediated modulation of IL‐17 signaling during liver fibrosis. Mice received CCl₄ (1 μl/g intraperitoneally) twice/week for 1 month. MSCs (1 × 10⁶), or MSC‐conditioned medium (MSC‐CM), were intravenously injected 24 h after CCl₄ and on every 7th day. Liver fibrosis was determined by macroscopic examination, histological analysis, Sirius red staining, and RT‐PCR. Serum levels of cytokines, indoleamine 2,3‐dioxygenase (IDO), and kynurenine were determined by ELISA. Flow cytometry was performed to identify liver‐infiltrated cells. In vitro, CD4⁺ T cells were stimulated and cultured with MSCs. 1‐methyltryptophan was used for inhibition of IDO. MSCs significantly attenuated CCl₄‐induced liver fibrosis by decreasing serum levels of inflammatory IL‐17, increasing immunosuppressive IL‐10, IDO, and kynurenine, reducing number of IL‐17 producing Th17 cells, and increasing percentage of CD4⁺IL‐10⁺ T cells. Injection of MSC‐CM resulted with attenuated fibrosis accompanied with the reduced number of Th17 cells in the liver and decreased serum levels of IL‐17. MSC‐CM promoted expansion of CD4⁺FoxP3⁺IL‐10⁺ T regulatory cells and suppressed proliferation of Th17 cells. This phenomenon was completely abrogated in the presence of IDO inhibitor. MSCs, in IDO‐dependent manner, suppress liver Th17 cells which lead to the attenuation of liver fibrosis.