Inflammatory bowel disease (IBD) is a chronic inflammatory disease of the gastrointestinal tract, which has a high recurrence rate and is incurable due to a lack of effective treatment. Mesenchymal stromal cells (MSCs) are a class of pluripotent stem cells that have recently received a lot of attention due to their strong self-renewal ability and immunomodulatory effects, and a large number of experimental and clinical models have confirmed the positive therapeutic effect of MSCs on IBD. In preclinical studies, MSC treatment for IBD relies on MSCs paracrine effects, cell-to-cell contact, and its mediated mitochondrial transfer for immune regulation. It also plays a therapeutic role in restoring the intestinal mucosal barrier through the homing effect, regulation of the intestinal microbiome, and repair of intestinal epithelial cells. In the latest clinical trials, the safety and efficacy of MSCs in the treatment of IBD have been confirmed by transfusion of autologous or allogeneic bone marrow, umbilical cord, and adipose MSCs, as well as their derived extracellular vesicles. However, regarding the stable and effective clinical use of MSCs, several concerns emerge, including the cell sources, clinical management (dose, route and frequency of administration, and pretreatment of MSCs) and adverse reactions. This article comprehensively summarizes the effects and mechanisms of MSCs in the treatment of IBD and its advantages over conventional drugs, as well as the latest clinical trial progress of MSCs in the treatment of IBD. The current challenges and future directions are also discussed. This review would add knowledge into the understanding of IBD treatment by applying MSCs.