A bone graft has been the gold standard treatment for repairing bone defects. However, due to bone grafts associated donor site morbidity several alternative bone substitutes options have been made available but with their added expense and limited osteoinductive properties they are not ideal. Therefore, research has begun in tissue engineering to investigate stem cells, which are one of the body’s own mechanisms used to repair bone. Stem cells are clonogenic undifferentiated cells capable of self-renewal. Readily available from numerous of sources stem cells have the potential to differentiate in osteoblasts and chrondrocytes showing capability to repair both bone and cartilage. The known immunologic properties of stem cells further enhance their therapeutic appeal. Stem cells have shown to be excellent carriers for gene transfer having the capability to be transduced. Gene transfer could enable growth factors and bone morphogentic proteins to enhance bone repair. Stem cells are implanted onto scaffolds, which are structures capable of supporting tissue formation by allowing cell migration, proliferation and differentiation. Research aims to produce scaffolds that deliver and retain cells, allow for cell attachment has adequate biodegradability, biocompatibility and non-immunogenicity. However, having tried and testing numerous materials including synthetic and natural products research into the perfect scaffold product continues. This review aims to explain how stem cells were discovered, the techniques used to isolate stem cells, identify and manipulate them down different cell lineages and discuss the research into using stem cells to reconstruct bone using genetic modification and scaffolds.