Mesenchymal stromal cells (MSCs) are a subset of heterogeneous non-hematopoietic fibroblast-like cells that can differentiate into cells of multiple lineages, such as chondrocytes, osteoblasts, adipocytes, myoblasts, and others. These multipotent MSCs can be found in nearly all tissues but mostly located in perivascular niches, playing a significant role in tissue repair and regeneration. Additionally, MSCs interact with immune cells both in innate and adaptive immune systems, modulating immune responses and enabling immunosuppression and tolerance induction. Understanding the biology of MSCs and their roles in clinical treatment is crucial for developing MSC-based cellular therapy for a variety of pathological conditions. Here, we review the progress in the study on the mechanisms underlying the immunomodulatory and regenerative effects of MSCs; update the medical translation of MSCs, focusing on the registration trials leading to regulatory approvals; and discuss how to improve therapeutic efficacy and safety of MSC applications for future.