Mesenchymal stem cells (MSCs) are a heterogeneous subset of stromal stem cells that can be isolated from many adult tissues. They can differentiate into cells of the mesodermal lineage, such as adipocytes, osteocytes and chondrocytes, as well as cells of other embryonic lineages. MSCs can interact with cells of both the innate and adaptive immune systems, leading to the modulation of several effector functions. After in vivo administration, MSCs induce peripheral tolerance and migrate to injured tissues, where they can inhibit the release of pro-inflammatory cytokines and promote the survival of damaged cells. This Review discusses the targets and mechanisms of MSC-mediated immunomodulation and the possible translation of MSCs to new therapeutic approaches.