Macrophages play an important role in the pathogenesis of rheumatoid arthritis (RA), in which the functions of pro-inflammatory macrophages (M1) and anti-inflammatory macrophages (M2) are different. Our previous studies have demonstrated that interleukin-1β (IL-1β) stimulated human umbilical cord mesenchymal stem cells (hUCMSCs) increase the expression of tumor necrosis factor-related apoptosis-inducing ligand (TRAIL) and initiate breast cancer cell apoptosis via ligand to death receptor 4 (DR4) and DR5. In this study, we examined the effect of IL-1β stimulated hUCMSCs (IL-1β-hUCMSCs) on immunoregulation of M1 and M2 macrophages in vitro and in the RA mouse model. The results showed that IL-1β-hUCMSCs increased macrophage polarization into M2 macrophages and enhanced apoptosis of M1 macrophages in vitro. Moreover, the intravenous injected IL-1β-hUCMSCs in RA mice rehabilitated the imbalance of M1/M2 ratio and thus demonstrated the potential to reduce inflammation in RA. This study advances our knowledge of the underlying immunoregulatory mechanisms involved in IL-1β-hUCMSCs to induce M1 macrophage apoptosis and promote the anti-inflammatory polarization of M2 macrophages and demonstrates the potential of IL-1β-hUCMSCs to reduce inflammation in RA.