Abstract Importance Mesenchymal stromal cells (MSCs) possess therapeutic properties that mediate repair. Obesity impairs MSC functionality and therapeutic efficacy, possibly by eliciting dynamic modifications of epigenetic markers, like 5-hydroxymethylcytosine (5hmC). Objective We hypothesized that human obesity alters the 5hmC landscape and anti-inflammatory capacity of adipose tissue-derived MSCs to activate the prominent inflammatory signaling mediator Interleukin (IL)-1β. Design, Setting, Participants, Intervention Adipose tissue samples were collected from obese and lean individuals (body mass index ≥30 or <30 kg/m2, respectively, n = 11 each) during weight-loss or kidney donation surgery. Main Outcomes and Measures MSCs were harvested and analyzed for 5hmC profiles (MeDIP-seq) and mRNA expression (RNA-seq) (n = 5 each). Subsequently, MSCs or a vehicle were injected into mice, (n = 6 each) and two-weeks later, kidneys were evaluated using in-vivo magnetic resonance imaging and ex vivo studies. The role of IL-1β was then studied in-vitro in MSC-induced immunomodulation using siRNA in macrophages. Results Compared to MSC from lean patients, obese-MSC genes showed 2087 differential 5hmC modifications and 175 differential mRNA expression. Among them, 14 genes with overlapping alterations were involved in regulation of cytokine production, prominently IL-1β. Injecting obese MSCs elevated renal expression of IL-1β and M1 macrophage count but lowered kidney perfusion. Silencing IL-1β in obese-MSCs in vitro reduced M1 phenotype switching in co-incubated macrophages. Conclusions and Relevance Obesity induces epigenetic and gene expression changes in MSCs, particularly in IL-1β, associated with impaired anti-inflammatory functionality of MSCs. Targeting IL-1β could be a useful therapeutic approach to modulate the decline in MSC functionality resulting from obesity.