More than 240 million opioid prescriptions are dispensed annually to treat pain in the US. The use of opioids is commonly associated with opioid tolerance (OT) and opioid-induced hyperalgesia (OIH), which limit efficacy and compromise safety. The dearth of effective way to prevent or treat OT and OIH is a major medical challenge. We hypothesized that mesenchymal stem cells (MSCs) attenuate OT and OIH in rats and mice based on the understanding that MSCs possess remarkable anti-inflammatory properties and that both OT and chronic pain are associated with neuroinflammation in the spinal cord. We found that the development of OT and OIH was effectively prevented by either intravenous or intrathecal MSC transplantation (MSC-TP), which was performed before morphine treatment. Remarkably, established OT and OIH were significantly reversed by either intravenous or intrathecal MSCs when cells were transplanted after repeated morphine injections. The animals did not show any abnormality in vital organs or functions. Immunohistochemistry revealed that the treatments significantly reduced activation level of microglia and astrocytes in the spinal cord. We have thus demonstrated that MSC-TP promises to be a potentially safe and effective way to prevent and reverse two of the major problems of opioid therapy.