Severe intraventricular hemorrhage (IVH) remains a major cause of mortality and long-term neurologic morbidities in premature infants, despite recent advances in neonatal intensive care medicine. Several preclinical studies have demonstrated the beneficial effects of mesenchymal stem cell (MSC) transplantation in attenuating brain injuries resulting from severe IVH. Because there currently exists no effective intervention for severe IVH, the therapeutic potential of MSC transplantation in this intractable and devastating disease is creating excitement in this field. This review summarizes recent progress in stem cell research for treating neonatal brain injury due to severe IVH, with a particular focus on preclinical data concerning important issues, such as mechanism of protective action and determining optimal source, route, timing, and dose of MSC transplantation, and on the translation of these preclinical study results to a clinical trial.