Indoleamine 2,3-dioxygenase 1 (IDO1) is an inducible, heme-containing enzyme that is critically involved in tryptophan catabolism and known to be a prominent immune regulator. Cell therapies with increased IDO1 expression are of high interest for a variety of indications, including autoimmune disorders, inflammatory diseases, transplant recovery, and wound healing. In particular, iPSC-derived mesenchymal stem cells (iIMSCs) engineered to overexpress 1DO1 may be ideal for suppressing dysregulated immune cells while simultaneously promoting expansion of regulatory I' lymphocytes and the M1 (pro- inflammatory) to M2 (anti-inflammatory) polarization of macrophages. Here, we report the development of an iMSC cell line containing an IDOI transgene under the control of a Jel’ promoter that was inserted into the AAVS] safe-harbor locus in mRNA-reprogrammed iPSCs. A clonal population of edited cells (i.e. IDO1-1PSCs) was isolated using single-cell sorting. Bi-allelic insertion of the IDOI transgene was confirmed by amplicon sequencing. The 1DO1-1PSCs were then differentiated to IDO1-iMSCs. During differentiation, we found that the 1DO1-iPSCs showed an unexpected, cuboidal morphology and noticeably decreased proliferation rates relative to control iPSCs, possibly indicating that IDO1 was interfering with the differentiation process. 1'wo small-molecule IDO] inhibitors, Epacadostat, which binds to holo (heme-bound) IDOI and inhibits the enzymatic function of the protein, and IDO1-IN-5, which binds to apo (heme-dissociated) 1DO1 and inhibits [DO1-dependent cell signaling, were added to the culture for the final five days of differentiation. The addition of both IDO! inhibitors (each at a 10uM concentration) increased the proliferation of the partly differentiated IDO1-iPSCs (6 h reduction in doubling time) with a population doubling time approaching that of control iMSCs (29 h vs. 27 h). While both inhibitors could enhance proliferation independently, Epacadostat alone had a larger effect on population doubling time than the IDO1-IN-5 alone (6h vs. 2h reduction in doubling time), suggesting that the anti-inflammatory enzymatic function of IDO1 may be most responsible for decreased proliferation during differentiation of IDO1-iPSCs. Notably, we also found that when administering both IDO1 inhibitors to non-engineered control iMSCs, the population doubling time increased relative to untreated test cultures (34 h versus 27 h), suggesting a possible minimum IDO1 protein level required for optimal iMSC culture. These results suggest that small-molecule inhibition of transgene-encoded proteins may form a key element of directed differentiation process development for knock-in iP$ cell lines, and may be useful for the scale-up manufacturing of IDO1-iMSCs in particular.