Mesenchymal stem cells (MSCs) are self-renewing precursor cells that can differentiate into bone, fat, cartilage, and stromal cells of the bone marrow. Recent studies suggest that MSCs themselves are critical for forming a niche that maintains hematopoietic stem cells (HSCs). The ease by which human MSC-like and stromal progenitor cells can be isolated from the bone marrow and other tissues has led to the rapid development of clinical investigations exploring their anti-inflammatory properties, tissue preservation capabilities, and regenerative potential. However, the identity of genuine MSCs and their specific contributions to these various beneficial effects have remained enigmatic. In this article, we examine the definition of MSCs and discuss the importance of rigorously characterizing their stem cell activity. We review their role and that of other putative niche constituents in the regulation of bone marrow HSCs. Additionally, how MSCs and their stromal progeny alter immune function is discussed, as well as potential therapeutic implications.