Autoimmune diseases are characterized by immune dysregulation, resulting in aberrant reactivity of T cells and antibodies to self-antigens, leading to various patterns of inflammation and organ dysfunction. However, current therapeutic agents exhibit broad-spectrum activity and lack disease-specific selectivity, leading to enduring adverse effects, notably severe infections, and malignancies, and patients often fail to achieve the intended clinical goals. Mesenchymal stromal cells (MSCs) are multipotent stromal cells that can be easily derived from various tissues, such as adipose tissue, umbilical cords, Wharton's jelly, placenta, and dental tissues. MSCs offer advantages due to their immunomodulatory and anti-inflammatory abilities, low immunogenicity, and a high capacity for proliferation and multipotent differentiation, making them excellent candidates for cell-based treatment in autoimmune disorders. This review will cover preclinical studies and clinical trials involving MSCs in autoimmune diseases, as well as the primary challenges associated with the clinical application of MSC therapies and strategies for maximizing their therapeutic potential.