The coronavirus disease 2019 (COVID-19), caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), has placed a global public burden on health authorities. Although the virological characteristics and pathogenesis of COVID-19 has been largely clarified, there is currently no specific therapeutic measure. In severe cases, acute SARS-CoV-2 infection leads to immune disorders and damage to both the adaptive and innate immune responses. Having roles in immune regulation and regeneration, mesenchymal stem cells (MSCs) serving as a therapeutic option may regulate the over-activated inflammatory response and promote recovery of lung damage. Since the outbreak of the COVID-19 pandemic, a series of MSC-therapy clinical trials has been conducted. The findings indicate that MSC treatment not only significantly reduces lung damage, but also improves patient recovery with safety and good immune tolerance. Herein, we summarize the recent progress in MSC therapy for COVID-19 and highlight the challenges in the field.