The use of stem cell-based protocols in transplantation has rapidly achieved many long-sought goals, including the induction of donor-specific tolerance and as an effective immunomodulatory therapy against acute cellular rejection and graft-versus-host disease. Recent advances in the fields of transplant immunology and regenerative medicine have significantly improved outcomes after solid organ and vascularized composite allotransplantation, as evidenced by data from preclinical, translational, and clinical trials. Specifically, stem cell therapies have been shown to diminish effector T cell responses, expand regulatory T cell populations, decrease the incidence and severity of rejection, improve nerve regeneration, and facilitate the induction of mixed hematopoietic chimerism. This review summarizes the latest developments in the use of mesenchymal and hematopoietic stem cell-based therapies in advancing the field of transplantation by eliminating the need for systemic life-long immunosuppression.