In addition to their potential for replacing damaged and diseased tissues by differentiating into tissue-specific cells, mesenchymal stem cells (MSCs) have been found to interact closely with immune cells, such as lymphocytes. In this review, we will discuss current research regarding the immunomodulatory properties of MSCs and the effects of lymphocytes on MSCs. We will suggest how these findings could be translated to potential clinical treatment. MSCs can regulate immune response by inducing activated T-cell apoptosis through the FAS ligand (FASL)/FAS-mediated death pathway via cell-cell contact, leading to up-regulation of regulatory T-cells (Tregs), which ultimately results in immune tolerance. Conversely, lymphocytes can impair survival and osteogenic differentiation of implanted MSCs by secreting the pro-inflammatory cytokines IFN-γ and TNF-α and/or through the FASL/FAS-mediated death pathway, thereby negatively affecting MSC-mediated tissue regeneration. One novel strategy to improve MSC-based tissue engineering involves the reduction of IFN-γ and TNF-α concentration by systemic infusion of Tregs or local application of aspirin. Further understanding of the mechanisms underlying the interplay between lymphocytes and MSCs may be helpful in the development of promising approaches to improve cell-based regenerative medicine and immune therapies.