STAT3 is a transcription factor implicated in renal fibrotic injury, but the role of STAT3 in mesenchymal stem cell (MSC)-induced renoprotection during renal fibrosis remains unknown. We hypothesized that MSCs protect against obstruction-induced renal fibrosis by downregulating STAT3 activation and STAT3-induced matrix metalloproteinase 9 (MMP-9) expression. Male Sprague-Dawley rats underwent renal arterial injection of vehicle or MSCs (1 x 106 per rat) immediately prior to sham operation or induction of unilateral ureteral obstruction (UUO). The kidneys were harvested after 4 weeks and analyzed for collagen I and III gene expression, collagen deposition (Masson's trichrome), fibronectin, α-SMA, active STAT3 (pSTAT3), MMP-9, and tissue inhibitors of matrix metalloproteinases 1 (TIMP-1), expression. In a separate arm, the STAT3 inhibitor, S3I-201 (10mg/kg), vs. vehicle was administered to rats intraperitoneally (IP) just after induction of UUO and daily for 14 days thereafter. The kidneys were harvested after 2 weeks and analyzed for pSTAT3 and MMP-9 expression, and collagen and fibronectin deposition. Renal obstruction induced a significant increase in collagen, fibronectin, α-SMA, pSTAT3, MMP-9 and TIMP-1 expression, while exogenously administered MSCs significantly reduced these indicators of obstruction-induced renal fibrosis. STAT3 inhibition with S3I-201 significantly reduced obstruction-induced MMP-9 expression and tubulointerstitial fibrosis. These results demonstrate that MSCs protect against obstruction-induced renal fibrosis, in part, by decreasing STAT3 activation and STAT3-dependent MMP-9 production.