Stem cell-based therapies are promising candidates for immunotherapy in transplantation with the potential both to repair the transplant after injury and to modulate the immune response to allogeneic tissue. Hematopoietic stem cells (HSCs) have long been known to modulate the immune response to alloantigens and are currently being used in a number of tolerance induction strategies. Mesenchymal stromal cells (MSCs) possess pro-reparative and immunomodulatory properties with preclinical data demonstrating that they have the ability to prevent early graft dysfunction and facilitate graft prolongation. The mechanisms used by HSCs and MSCs to modulate the immune response have been investigated in vitro with studies revealing novel mechanisms of action, but more studies are needed to clarify their mechanisms of action in vivo. HSCs when used in sufficient numbers can delete donor alloantigen reactive leukocytes thereby reducing the frequency of donor reactive cells in the recipient. At lower cell doses they promote immune regulation. Importantly, MSCs have the ability to sense their environment which may influence their function. The application of MSCs in transplantation is being evaluated in phase I/II clinical trials but optimization of key parameters that will ensure their efficacy in vivo, including dose, timing and route of delivery is required to enable this strategy for repairing injured tissue and/or immunomodulation to achieve its full potential. Â© 2014 Elsevier Inc. All rights reserved.