In this Review we summarize our current understanding of the biology of mesenchymal cells of the intestinal lamina propria focusing mainly on fibroblasts and myofibroblasts. The topics covered include 1) the embryonic origin of mesenchymal cells of the intestinal lamina propria and their heterogeneity in adults, 2) the role of the mesenchyme in intestinal development, 3) the physiological function of fibroblasts and myofibroblasts in adults as part of the intestinal stem cell niche and the mucosal immune system and 4) the involvement of fibroblasts and myofibroblasts in epithelial homeostasis upon injury and in the pathogenesis of diseases such as Inflammatory Bowel Diseases, fibrosis and cancer. We emphasize studies addressing the function of intestinal mesenchymal cells in vivo, and also discuss major open questions and current challenges in this field.