Mesenchymal stromal cells (MSCs) can be isolated from several human tissues and expanded for clinical use. MSCs are identified by phenotypic and functional characteristics, and are poor Ag-presenting cells not expressing MHC class II or co-stimulatory molecules. MSCs have potent immune-modulatory effects and in vitro induce a more anti-inflammatory or tolerant phenotype. Clinical studies have exploited both the immune-modulatory properties of MSCs as well as their hematopoietic supportive role. MSCs have been safely administered for the treatment of severe steroid refractory GVHD. A phase I/II multicenter study included 25 children in whom 80% responded to either one or two infusions of MSCs derived mainly from third party donors. Twenty children have undergone co-transplantation of haploidentical MSCs with PBSC in a phase I/II study, which has overcome the problems of graft failure in HLA-disparate grafts. Similarly, co-transplantation of MSCs and cord blood stem cells is under investigation. MSCs may have important future potential for the treatment of pediatric autoimmune disease as well as inborn errors such as osteogenesis imperfecta. Currently, much needed randomized studies under the auspices of the EBMT are ongoing to determine the optimal use of these exciting new modalities of treatment.