Upon implantation of a biomaterial, mesenchymal stem cells (MSCs) and macrophages contribute to the wound healing response and the regeneration cascade. Although biomaterial properties are known to direct MSC differentiation and macrophage polarization, the role of biomaterial cues, specifically stiffness, in directing the crosstalk between the two cell types is still poorly understood. This study aimed to elucidate the role of substrate stiffness in modulating the immunomodulatory properties of MSCs and to shed light on their complex interactions with macrophages when presented with diverse biomaterial stiffness cues, a situation analogous to the implant environment where multiple cell types interact with an implanted biomaterial to determine regenerative outcomes. We show that MSCs do not play an immunomodulatory role in the absence of an inflammatory stimulus. Using collagen-coated polyacrylamide gels of varying stiffness values, we demonstrate that the immunomodulatory capability of MSCs in the presence of an inflammatory stimulus is not dependent on the stiffness of the underlying substrate. Moreover, using paracrine and direct contact culture models, we show that a bidirectional crosstalk between MSCs and macrophages is necessary for promoting anti-inflammatory responses and positive immunomodulation, which is dependent on the stiffness of the underlying substrate. We finally show that direct cell–cell contact is not essential for this effect, with paracrine interactions promoting immunomodulatory interactions between MSCs and macrophages. Together, these results demonstrate that biophysical cues such as stiffness that are presented by biomaterials can be tuned to promote positive interactions between MSCs and macrophages which can in turn direct the downstream regenerative response.