Because of its easier accessibility and less severe graft-versus-host disease, umbilical cord blood (UCB) has been increasingly used as an alternative to bone marrow for hematopoietic stem cell transplantation. Naiveté of UCB lymphocytes, however, results in delayed immune reconstitution and infection-related mortality in transplant recipients. This review updates the phenotypic and functional deficiencies of various immune cell populations in UCB compared with their adult counterparts and discusses clinical implications and possible therapeutic strategies to improve the outcome of stem cell transplantation.