Pluripotent stem cells (PSCs) are an attractive, reliable source for generating functional cardiomyocytes for regeneration of infarcted heart. However, inefficient cell engraftment into host tissue remains a notable challenge to therapeutic success due to mechanical damage or relatively inhospitable microenvironment. Evidence has shown that excessively formed scar tissues around cell delivery sites present as mechanical and biological barriers that inhibit migration and engraftment of implanted cells. In this review, we focus on the functional responses of stem cells and cardiomyocytes during the process of cardiac fibrosis and scar formation. Survival, migration, contraction, and coupling function of implanted cells may be affected by matrix remodeling, inflammatory factors, altered tissue stiffness, and presence of electroactive myofibroblasts in the fibrotic microenvironment. Although paracrine factors from implanted cells can improve cardiac fibrosis, the transient effect is insufficient for complete repair of an infarcted heart. Furthermore, investigation of interactions between implanted cells and fibroblasts including myofibroblasts helps the identification of new targets to optimize the host substrate environment for facilitating cell engraftment and functional integration. Several antifibrotic approaches, including the use of pharmacological agents, gene therapies, microRNAs, and modified biomaterials, can prevent progression of heart failure and have been developed as adjunct therapies for stem cell‐based regeneration. Investigation and optimization of new biomaterials is also required to enhance cell engraftment of engineered cardiac tissue and move PSCs from a laboratory setting into translational medicine.