Although tremendous progress has been achieved in understanding the molecular basis of tissue repair and regeneration in diverse model organisms, the tendency of mammals for imperfect healing and scarring rather than regeneration remains unexplained. Moreover, conditions of impaired wound healing, e.g. non-healing skin ulcers associated with diabetes mellitus or vascular disease, as well as excessive scarring, represent major clinical and socio-economical problems. The development of innovative strategies to improve tissue repair and regeneration is therefore an important task that requires a more thorough understanding of the underlying molecular and cellular mechanisms. There is substantial evidence in different model organisms that the immune system is of primary importance in determining the quality of the repair response, including the extent of scarring, and the restoration of organ structure and function. Findings in diverse species support a correlation between the loss of regeneration capacity and maturation of immune competence. However, in recent years, there is increasing evidence on conditions where the immune response promotes repair and ensures local tissue protection. Hence, the relationship between repair and the immune response is complex and there is evidence for both negative and positive roles. We present an overview on recent evidence that highlights the immune system to be key to efficient repair or its failure. First, we summarize studies in different model systems that reveal both promoting and impeding roles of the immune system on the regeneration and repair capacity. This part is followed by a delineation of diverse inflammatory cell types, selected peptide growth factors and their receptors as well as signaling pathways controlling inflammation during tissue repair. Finally, we report on new mechanistic insights on how these inflammatory pathways impair healing under pathological conditions and discuss therapeutic implications.