Mesenchymal stromal cells (MSCs) have been widely investigated for regenerative medicine applications, from treating various inflammatory diseases as a cell therapy to generating engineered tissue constructs. Numerous studies have evaluated the potential effects of MSCs following therapeutic administration. By responding to their surrounding microenvironment, MSCs may mediate immunomodulatory effects through various mechanisms that directly (i.e., contact-dependent) or indirectly (i.e., paracrine activity) alter the physiology of endogenous cells in various disease pathologies. More specifically, a pivotal crosstalk between MSCs and tissue-resident macrophages and monocytes (TMφ) has been elucidated using in vitro and in vivo preclinical studies. An improved understanding of this crosstalk could help elucidate potential mechanisms of action (MOAs) of therapeutically administered MSCs. TMφ, by nature of their remarkable functional plasticity and prevalence within the body, are uniquely positioned as critical modulators of the immune system – not only in maintaining homeostasis but also during pathogenesis. This has prompted further exploration into the cellular and molecular alterations to TMφ mediated by MSCs. In vitro assays and in vivo preclinical trials have identified key interactions mediated by MSCs that polarize the responses of TMφ from a pro-inflammatory (i.e., classical activation) to a more anti-inflammatory/reparative (i.e., alternative activation) phenotype and function. In this review, we describe physiological and pathological TMφ functions in response to various stimuli and discuss the evidence that suggest specific mechanisms through which MSCs may modulate TMφ phenotypes and functions, including paracrine interactions (e.g., secretome and extracellular vesicles), nanotube-mediated intercellular exchange, bioenergetics, and engulfment by macrophages. Continued efforts to elucidate this pivotal crosstalk may offer an improved understanding of the immunomodulatory capacity of MSCs and inform the development and testing of potential MOAs to support the therapeutic use of MSCs and MSC-derived products in various diseases.