The mucosal surfaces of the gastrointestinal and respiratory tracts are strategically shielded with versatile epithelial cells which constitute a physical barrier that segregate mucosal immune system from the luminal microbiota and importantly regulate host tolerance and immunity. Major Histocompatibility complex (MHC) II is dynamically expressed on these epithelial cells and plays key roles in tissue-resident immune cell activation, epithelial cell differentiation and intestinal tumorigenesis. The expression of MHC II is induced in response to inflammation, parasitic infections, and upon exposure to microbiota and reported to be increased in inflammatory bowel disease (IBD). However, the regulation of epithelial cell-specific MHC II during homeostasis is yet to be explored. We have discovered a novel role for IL-22 in suppressing epithelial cell MHC II via the regulation of endoplasmic reticulum (ER) stress, using animals lacking the Interleukin-22-receptor (IL-22RA1), primary human and murine intestinal and respiratory organoids, and a murine model of infection (pneumovirus) or with epithelial cell defects (Muc2 missense mutation). Animals lacking IL-22RA1 have significantly higher MHC II expression on small intestinal and respiratory epithelial cells at baseline. IL-22 directly downregulated Interferon-γ-induced MHC II on primary mucosal epithelial cells by modulating the expression of MHC II antigen A alpha (H2-Aα) and Class II transactivator (Ciita), a master regulator of MHC II gene expression. Using chemical-induced and spontaneous mouse models of IBD (colitis), we show that in non-infectious inflammatory disease, IL-22-induced suppression of MHC II expression leads to an improvement in the paracellular barrier permeability, restoration of goblet cells, reduced inflammation and attenuated disease. However, during acute infection of respiratory mucosa, IL-22-mediated suppression of epithelial cell-MHC II expression leads to an aberrant immune response, suppression of cellular stress, increased mucus secretion, severe pathology, and increased mortality. Our work highlights the context dependent role of IL-22 and the potential implications for future IL-22-based therapeutics as long-circulating recombinant IL-22 are currently in clinical trials for several indications including inflammatory bowel disease.