Stem cells have generated a great deal of excitement in cell‐based therapies. Here, a unique class of multifunctional nanoparticles (MFNPs) with both upconversion luminescence (UCL) and superparamagnetic properties is used for stem cell research. It is discovered that after being labeled with MFNPs, mouse mesenchymal stem cells (mMSCs) are able to maintain their viability and differentiation ability. In vivo UCL imaging of MFNP‐labeled mMSCs transplanted into animals is carried out, achieving ultrahigh tracking sensitivity with a detection limit as low as ≈10 cells in a mouse. Using both UCL optical and magnetic resonance (MR) imaging approaches, MFNP‐labeled mMSCs are tracked after being intraperitoneally injected into wound‐bearing mice under a magnetic field. The translocation of mMSCs from the injection site to the wound nearby the magnet is observed and, intriguingly, a remarkably improved tissue repair effect is observed as the result of magnetically induced accumulation of stem cells in the wound site. The results demonstrate the use MFNPs as novel multifunctional probes for labeling, in vivo tracking, and manipulation of stem cells, which is promising for imaging guided cell therapies and tissue engineering.