question: BACKGROUND: Umbilical cord-derived mesenchymal stromal cells (UC-MSCs) revealed their key role in immune regulation, offering promising therapeutic perspectives for immune and inflammatory diseases. We aimed to develop a production process of an UC-MSC-based product and then to characterize UC-MSC properties and immunomodulatory activities in vitro, related to their clinical use and finally, to transfer this technology to a good manufacturing practice (GMP) compliant facility, to manufacture an advanced therapy medicinal product (ATMP). METHODS: Fifteen human umbilical cords (UCs) were collected to develop the production process. Three batches of UC-MSCs from a single donor were characterized at basal state and after in vitro pro-inflammatory stimulation by interferon-γ (IFNγ) and tumor necrosis factor-α (TNFα). Proliferation, immunophenotype, activation markers’ expression and the inhibition of T cell proliferation were assessed. Finally, this technology was transferred to a GMP-compliant facility to manufacture an UC-MSC-based ATMP, from a single donor, using the explant method followed by the establishment of master and work cell stocks. RESULTS: Twelve UCs were processed successfully allowing to isolate UC-MSCs with doubling time and population doubling remaining stable until passage 4. CD90, CD105, CD73, CD44, CD29, CD166 expression was positive; CD14, CD45, CD31, HLA-DR, CD40, CD80 and CD86 expression was negative, while CD146 and HLA-ABC expression was heterogeneous. Cell morphology, proliferation and immunophenotype were not modified by inflammatory treatment. Indoleamine 2,3-dioxygenase (IDO) expression was significantly induced by IFNγ and IFNγ + TNFα versus non-treated cells. Intercellular adhesion molecule-1 (ICAM-1) and vascular cell adhesion molecule 1 (VCAM-1) expression was induced significantly after priming. T cell proliferation was significantly decreased in the presence of UC-MSCs in a dose-dependent manner. This inhibitory effect was improved by IFNγ or IFNγ + TNFα, at UC-MSCs:PBMC ratio 1:10 and 1:30, whereas only IFNγ allowed to decrease significantly T cell proliferation at ratio 1:100. The manufacturing process of the UC-MSC-based ATMP was qualified and authorized by the French regulatory agency for clinical use (NCT04333368). CONCLUSION: This work allowed to develop an investigational UC-MSC-based ATMP authorized for clinical use. Our results showed that an inflammatory environment preserves the biological properties of UC-MSCs with an improvement of their immunomodulatory functions. SUPPLEMENTARY INFORMATION: The online version contains supplementary material available at 10.1186/s13287-021-02637-7.