Mesenchymal stem cells (MSC) - isolated from various tissues in humans and other species - are one of the most promising adult stem cell types due to their availability and the relatively simple requirements for in vitro expansion. They have the capacity to differentiate into several tissues, including bone, cartilage, tendon, muscle and adipose, and produce growth factors and cytokines that promote hematopoietic cell expansion and differentiation. In vivo, MSCs are able to repair damaged tissue from kidney, heart, liver, pancreas and gastrointestinal tract. Furthermore, they also have anti-proliferative, immunomodulatory and anti-inflammatory effects, but evoke only little immune reactivity. Although the mechanism underlying the immunosuppressive effects of MSCs has not been clearly defined, their immunosuppressive properties have already been exploited in the clinical setting. Therefore, in the future, MSCs might have implications for treatment of allograft rejection, graft-versus-host disease, rheumatoid arthritis, autoimmune inflammatory bowel disease and other disorders in which immunomodulation and tissue repair are required. The aim of this review is to critically analyze the field of MSC biology, particularly with respect to their immunomodulatory properties and potential clinical use in the future.