Protein arginine methyltransferases (PRMTs) catalyze symmetric and asymmetric methylation on arginine residues of multiple protein targets including histones and have essential roles in organismal development and disease. PRMT5 mediates symmetric di-methylation (sDMA) of arginine 2 (H3R2me2s) and arginine 8 on histone 3 (H3R8me2s), arginine 3 on histones 2A and 4 (H2A/H4R3me2s) as well as several non-histone substrates like Sm proteins. Here, we found that selective inhibition of PRMT5 in mesenchymal stromal cells (MSCs) led to a reduction in colony forming units (CFUs) and increased osteoblast differentiation. PRMT5 inhibition blocked global symmetric dimethylation of H3R8 and H4R3 but not on H3R2. Genome-wide expression analysis by total RNA sequencing of mesenchymal stromal cells undergoing osteogenic differentiation revealed significant reduction in the intrinsic expression of several interferon-stimulated genes (ISGs) upon PRMT5 inhibition. Effects of PRMT5 inhibition on basal ISG expression and osteogenic differentiation was effectively blocked by exogenous activation of type I IFN signaling. Together, these results indicate important functions for PRMT5 in the regulation of basal interferon gene expression in MSCs and in the control of differentiation potential of MSCs during osteogenic differentiation.