Objective To prevent Graft-versus-host disease (GVHD) in rat model, we evaluated the feasibility of mesenchymal stem cells (MSCs) as a gene transfer target and studied the efficiency of recombinant adenovirus mediated gene therapy. Methods We constructed the recombinant adenovirus containing CTLA4Ig gene. Rat MSCs of passages 3-5 were infected by the adenovirus, and the transfection efficiency was monitored by GFP markers. We performed flow cytometric analysis, immunohistochemical and West blotting analysis to identify the CTLA4Ig expression. The gene transferred MSCs were tested for their ability to inhibit the allogeneic lymphocyte response in vitro and to prevent GVHD in a rat model. Results Recombinant adenovirus pAd-CTLA4Ig was correctly constructed and confirmed. After MSCs were infected by the adenovirus, the CTLA4Ig protein was detected not only in transgenic MSCs, but also in the culture medium. In a mixed lymphocytes response (MLR) test, the transgenic MSCs could significantly inhibit the allogeneic lymphocyte response compared with the control groups (P<0.05). A model of GVHD was developed by transplanting bone marrow cells and spleen lymphocytes of F344 rats to lethally irradiated SD rats. The onset of GVHD could be ameliorated or prevented by co-administration of transgenic MSCs. All the rats in the control groups suffered severe acute GVHD. CTLA4Ig expression was observed in the liver, intestine, kidney and spleen 30 days post- transplantation. Conclusions Our results indicate that adenoviral vectors could efficiently transfer CTLA4Ig gene into MSCs and sustain long-term stable expression in vitro and in vivo.