Stem cell transplantation is a potential therapy for regenerative medicine, which aims to restore tissues damaged by trauma, aging, and diseases. Since its conception in the late 1990s, chemical biology has provided powerful and diverse small molecule tools for modulating stem cell function. Embryonic stem cells could be an ideal source for transplantation, but ethical concerns restrict their development for cell therapy. The seminal advance of induced pluripotent stem cell (iPSC) technology provided an attractive alternative to human embryonic stem cells. However, iPSCs are not yet considered an ideal stem cell source, due to limitations associated with the reprogramming process and their potential tumorigenic behavior. This is an area of research where chemical biology has made a significant contribution to facilitate the efficient production of high quality iPSCs and elucidate the biological mechanisms governing their phenotype. In this review, we summarize these advances and discuss the latest progress in developing small molecule modulators. Moreover, we also review a new trend in stem cell research, which is the direct reprogramming of readily accessible cell types into clinically useful cells, such as neurons and cardiac cells. This is a research area where chemical biology is making a pivotal contribution and illustrates the many advantages of using small molecules in stem cell research.