The discovery that Mesenchymal Stem Cells (MSCs) can strongly inhibit T cell proliferation in vitro and in vivo and exert similar inhibitory effects on B cells, dendritic cells, and natural killer cells has highlighted the potential for clinical translation of these cells as a new class of stem cell therapy for autoimmune disease, organ transplantation and treatment of graft-versus-host disease (GVHD). Even though the mechanism underlying these immunosuppressive effects of MSCs has not been clearly defined, their immunosuppressive properties are already being exploited in the clinical setting. Most of these early clinical studies are investigating the effect of MSCs in suppressing GVHD after allogenenic hematopoietic stem cell transplantation (HSCT). Additional studies, mostly in animal models, are being conducted in solid organ transplantation, such as: heart, renal, liver and skin. While the early results of these studies are conflicting, the potential for clinical benefit remains high and further studies are warranted in order to discover the best methods and settings for consistent clinical results. MSCs have opened a series of opportunities for researchers in the areas of transplantation and autoimmune disease. While it is important not to overestimate the potential therapeutic effects of MSCs, and well-designed preclinical trials should be done before clinical use.