Macroautophagy has been implicated in modulating the therapeutic function of mesenchymal stromal cells (MSCs). However, the biological function of chaperone-mediated autophagy (CMA) in MSCs remains elusive. Here, we found that CMA was inhibited in MSCs in response to the proinflammatory cytokines interferon-γ (IFN-γ) and tumor necrosis factor-α (TNF-α). In addition, suppression of CMA by knocking down the CMA-related lysosomal receptor lysosomal-associated membrane protein 2 (LAMP-2A) in MSCs significantly enhanced the immunosuppressive effect of MSCs on T cell proliferation, and as expected, LAMP-2A overexpression in MSCs exerted the opposite effect on T cell proliferation. This effect of CMA on the immunosuppressive function of MSCs was attributed to its negative regulation of the expression of chemokine C-X-C motif ligand 10 (CXCL10), which recruits inflammatory cells, especially T cells, to MSCs, and inducible nitric oxide synthase (iNOS), which leads to the subsequent inhibition of T cell proliferation via nitric oxide (NO). Mechanistically, CMA inhibition dramatically promoted IFN-γ plus TNF-α-induced activation of NF-κB and STAT1, leading to the enhanced expression of CXCL10 and iNOS in MSCs. Furthermore, we found that IFN-γ plus TNF-α-induced AKT activation contributed to CMA inhibition in MSCs. More interestingly, CMA-deficient MSCs exhibited improved therapeutic efficacy in inflammatory liver injury. Taken together, our findings established CMA inhibition as a critical contributor to the immunosuppressive function of MSCs induced by inflammatory cytokines and highlighted a previously unknown function of CMA.