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Healing and regeneration of bone injuries, particularly those that are associated with large bone defects, are a complicated process. There is growing interest in the application of osteoinductive and osteogenic growth factors and mesenchymal stem cells (MSCs) in order to significantly improve bone repair and regeneration. MSCs are multipotent stromal stem cells that can be harvested from many different sources and differentiated into a variety of cell types, such as preosteogenic chondroblasts and osteoblasts. The effectiveness of MSC therapy is dependent on several factors, including the differentiating state of the MSCs at the time of application, the method of their delivery, the concentration of MSCs per injection, the vehicle used, and the nature and extent of injury, for example. Tissue engineering and regenerative medicine, together with genetic engineering and gene therapy, are advanced options that may have the potential to improve the outcome of cell therapy. Although several in vitro and in vivo investigations have suggested the potential roles of MSCs in bone repair and regeneration, the mechanism of MSC therapy in bone repair has not been fully elucidated, the efficacy of MSC therapy has not been strongly proven in clinical trials, and several controversies exist, making it difficult to draw conclusions from the results. In this review, we update the recent advances in the mechanisms of MSC action and the delivery approaches in bone regenerative medicine. We will also review the most recent clinical trials to find out how MSCs may be beneficial for treating bone defects.