Mesenchymal stem cells (MSCs) have been recognized as a cell therapy with the potential to promote skin healing. MSCs, with their multipotent differentiation ability, can generate various cells related to wound healing, such as dermal fibroblasts (DFs), endothelial cells, and keratinocytes. In addition, MSCs promote neovascularization, cellular regeneration, and tissue healing through mechanisms including paracrine and autocrine signaling. Due to these characteristics, MSCs have been extensively studied in the context of burn healing and chronic wound repair. Furthermore, during the investigation of MSCs, their unique roles in skin aging and scarless healing have also been discovered. In this review, we summarize the mechanisms by which MSCs promote wound healing and discuss the recent findings from preclinical and clinical studies. We also explore strategies to enhance the therapeutic effects of MSCs. Moreover, we discuss the emerging trend of combining MSCs with tissue engineering techniques, leveraging the advantages of MSCs and tissue engineering materials, such as biodegradable scaffolds and hydrogels, to enhance the skin repair capacity of MSCs. Additionally, we highlight the potential of using paracrine and autocrine characteristics of MSCs to explore cell-free therapies as a future direction in stem cell-based treatments, further demonstrating the clinical and regenerative aesthetic applications of MSCs in skin repair and regeneration.