Multipotent mesenchymal stromal cells (MSC) can be isolated from many tissues, including bone marrow (BM) and placenta (PL). Human placenta can be obtained readily without invasive procedures. There may be differences, however, in differentiation capacity and immunomodulation by MSC isolated from BM or PL. The early pregnancy factor (heat shock protein 10; EPF/Hsp10) is a small protein that exhibits immunomodulatory properties. We compared BM- and PL-MSC, and assessed their efficacy for suppressing T-cell proliferation in vitro and the role of EPF/Hsp10 in this process. PL-MSC were collected from whole placenta after removal of the amniotic and chorionic membranes followed by serial enzymatic digestions. The PL-MSC were compared to BM-MSC, obtained from healthy donors. Differentiation capacity, cytokine secretion, expression and secretion of immunomodulatory molecules, immunophenotype and real time proliferation were assessed using cytokine arrays, ELISA assays, flow cytometry, immunohistochemical staining and western blotting. Whereas BM-MSC consisted of a homogeneous cell population with strong expression of mesenchymal markers, PL-MSC consisted of a mixed population of cells with variable CD73, CD90 and CD105 expression. PL-MSC exhibited a significantly greater proliferation rate than BM-MSC. The presence of both stem cells and more mature cells in the PL-MSC cultures resulted in decreased differentiation capacity and reduced efficacy of immune suppression in co-cultures with T-cells. Although robust intracellular expression of EPF/Hsp10 in both BM- and PL-MSC was observed, secretion of the protein in response to immune activating stimuli remained below detectable levels. Secretion of pro-inflammatory cytokines was significantly greater in BM-MSC than PL-MSC, whereas no difference was observed in the secretion of hematopoiesis supporting growth factors. Development of culture methods for isolation of pure populations of PL-MSC may improve the quality of the product and reproducibility of results.