Human amniotic epithelial cells (hAECs) derived from placental tissues have gained considerable attention in the field of regenerative medicine. hAECs possess embryonic stem cell-like proliferation and differentiation capabilities, and adult stem cell-like immunomodulatory properties. Compared with other types of stem cell, hAECs have special advantages, including easy isolation, plentiful numbers, the obviation of ethical debates, and non-immunogenic and non-tumorigenic properties. During the past two decades, the therapeutic potential of hAECs for treatment of various diseases has been extensively investigated. Accumulating evidence has demonstrated that hAEC transplantation helps to repair and rebuild the function of damaged tissues and organs by different molecular mechanisms. This systematic review focused on summarizing the biological characteristics of hAECs, therapeutic applications, and recent advances in treating various tissue injuries and disorders. Relevant studies published in English from 2000 to 2020 describing the role of hAECs in diseases and phenotypes were comprehensively sought out using PubMed, MEDLINE, and Google Scholar. According to the research content, we described the major hAEC characteristics, including induced differentiation plasticity, homing and differentiation, paracrine function, and immunomodulatory properties. We also summarized the current status of clinical research and discussed the prospects of hAEC-based transplantation therapies. In this review, we provide a comprehensive understanding of the therapeutic potential of hAECs, including their use for cell replacement therapy as well as secreted cytokine and exosome biotherapy. Moreover, we showed that the powerful immune-regulatory function of hAECs reveals even more possibilities for their application in the treatment of immune-related diseases. In the future, establishing the optimal culture procedure, achieving precise and accurate treatment, and enhancing the therapeutic potential by utilizing appropriate preconditioning and/or biomaterials would be new challenges for further investigation.