<p>Mesenchymal stem cells (MSCs) hold promise for treating inflammatory and immune-related diseases; however, their clinical application is limited by poor survival and function post-transplantation. Collagen hydrogels may support MSC viability and function by mimicking the extracellular matrix. This study aimed to evaluate how cell density and collagen concentration within three-dimensional (3D) collagen matrices affect the immunomodulatory behavior of MSCs under inflammatory conditions. MSCs were embedded in collagen hydrogels of varying stiffness and seeded at different densities. Constructs were stimulated with proinflammatory cytokines (tumor necrosis factor-α and interferon-γ), and changes in Gene expression, hydrogel contraction, and cell viability were analyzed. Lower collagen concentrations and higher seeding densities enhanced MSC immunomodulatory Gene expression and matrix contraction. High cell density increased contraction but reduced cell viability in softer gels. Mechanical properties of the matrix, such as stiffness and viscoelasticity, influenced cell behavior via mechanotransduction pathways. Both physical and biological cues within 3D collagen hydrogels significantly regulated MSC immunomodulatory responses. Optimizing collagen concentration and seeding density may improve the therapeutic potential of MSC-based treatments.</p>