Mesenchymal stem cells (MSC) are strongly associated with tumor progression and have been used as novel cell-based agents to deliver anticancer drugs to tumors. However, controversies about the direct involvement of MSCs in tumor progression suggest that MSCs mediate tumor progression in a cancer type-dependent manner. In this report, we analyzed the functional interactions between human MSCs and lung adenocarcinoma (LAC) cells to determine the therapeutic potential of MSCs in lung cancer. We showed that MSCs effectively inhibited the migration, invasion, and cell-cycle progression of several LAC cell lines. MSCs also enhanced the mesenchymal-epithelial transition (MET) pathway, as evidenced by the reduction of several epithelial-mesenchymal transition-related markers in LAC cells cocultured with MSCs or in MSC-conditioned medium (MSC-CM). By cytokine array analysis, we determined that Oncostatin M (OSM), a differentiation-promoting cytokine, was elevated in the MSC-CM derived from primary MSC cultures. Furthermore, OSM treatment had the same effects as MSC-CM on LAC, whereas neutralizing antibodies to OSM reversed them. Notably, short hairpin RNAs against STAT1, an important downstream target of OSM, hindered the OSM-dependent induction of MET. In vivo xenograft tumor studies indicated that OSM inhibited tumor formation and metastasis of LAC cells, whereas neutralizing OSM in the MSC-CM hampered its inhibitory effects. In conclusion, this study showed that OSM is a paracrine mediator of MSC-dependent inhibition of tumorigenicity and activation of MET in LAC cells. These effects of OSM may serve as a basis for the development of new drugs and therapeutic interventions targeting cancer cells.