The attractiveness of prodrug cancer gene therapy by stem cells targeted to tumors lies in activating the prodrug directly within the tumor mass, thus avoiding systemic toxicity. Suicide gene therapy using genetically engineered mesenchymal stem cells has the advantage of being safe, because prodrug administration not only eliminates tumor cells but consequently kills the more resistant therapeutic stem cells as well. This review provides an explanation of the stem cell-targeted prodrug cancer gene therapy principle, with focus on the choice of prodrug, properties of bone marrow and adipose tissue-derived mesenchymal stem and neural stem cells as well as the mechanisms of their tumor homing ability. Therapeutic achievements of the cytosine deaminase/5-fluorocytosine prodrug system and Herpes simplex virus thymidine kinase/ganciclovir are discussed. In addition, delivery of immunostimulatory cytokines, apoptosis inducing genes, nanoparticles and antiangiogenic proteins by stem cells to tumors and metastases is discussed as a promising approach for antitumor therapy. Combinations of traditional, targeted and stem cell-directed gene therapy could significantly advance the treatment of cancer.