Menstrual blood-derived stem cells (MenSCs) have great potential in the treatment of various diseases. As a novel type of mesenchymal stem cells (MSCs), MenSCs have attracted more interest due to their therapeutic effects in both animal models and clinical trials. Here, we described the differentiation, immunomodulation, paracrine, homing, and engraftment mechanisms of MenSCs. These include differentiation into targeting cells, immunomodulation with various immune cells, the paracrine effect on secreting cytokines, and homing and engraftment into injured sites. To better conduct MenSC-based therapy, some novel hotspots were proposed such as CRISPR (clustered regularly interspaced short palindromic repeats)/cas9-mediated gene modification, exosomes for cell-free therapy, single-cell RNA sequence for precision medicine, engineered MenSC-based therapy for the delivery platform, and stem cell niches for improving microenvironment. Subsequently, current challenges were elaborated on, with regard to age of donor, dose of MenSCs, transplantation route, and monitoring time. The management of clinical research with respect to MenSC-based therapy in diseases will become more normative and strict. Thus, a more comprehensive horizon should be considered that includes a combination of traditional solutions and novel strategies. In summary, MenSC-based treatment has a great potential in treating diseases through diverse strategies, and more therapeutic mechanisms and novel strategies need to be elucidated for future regenerative medicine and clinical applications.