Mesenchymal stem cells (MSCs) have been shown to be effective in the management of graft-versus-host disease (GVHD) due to their immunomodulatory effects. In addition to prevention and treatment of GVHD, many studies have demonstrated that MSCs can promote hematopoietic engraftment, accelerate lymphocyte recovery, reduce the risk of graft failure, and repair tissue damage in patients receiving hematopoietic stem cell transplantation (HSCT). Bone marrow (BM) has been considered as the traditional source of MSCs, and most of the knowledge concerning MSCs comes from BM studies. However, BM-derived MSCs have several limitations for their clinical application. Fetal-type MSCs can be isolated easier and proliferate faster in vitro as well as possessing a lower immunogenicity. Therefore, fetal-type MSCs, such as umbilical cord-derived MSCs, represent an excellent alternative source of MSCs. MSCs play multiple important roles in HSCT. Nevertheless, several issues regarding their clinical application remain to be discussed, including the safety of use in humans, the available sources and the convenience of obtaining MSCs, the quality control of in vitro-cultured MSCs and the appropriate cell passages, the optimum cell dose, and the optimum number of infusions. Furthermore, it is important to evaluate whether the rates of cancer relapse and infections increase when using MSCs for GVHD. There are still many questions regarding the clinical application of MSCs to HSCT that need to be answered, and further studies are warranted.