The pathogenesis of connective tissue diseases (CTDs), represented by systemic lupus erythematosus (SLE), rheumatoid arthritis (RA), systemic sclerosis (SSc), primary Sjögren's syndrome (pSS), and idiopathic inflammatory myopathies (IIM), includes various immune cells involved in both innate and adaptive immunity. The mesenchymal stem cells (MSCs) are unique due to their regulatory effect on immunity. This makes them a promising therapeutic approach for patients with immune-mediated disorders such as CTD. The safety and clinical efficacy of MSC treatment in CTD have been tested in a growing number of preclinical and clinical studies. Administration of MSCs has consistently shown benefits with both symptomatic and histologic improvement in CTD animal models. MSC therapies in severe and drug-resistant CTD patients have shown promise in a number of the pilot studies, cohort studies, and randomized controlled trials in SLE, RA, and SSc, but some problems still need to be resolved in the transition from the bench to the bedside. The relevant studies in pSS and IIM are still in their infancy, but have displayed encouraging outcomes. Considerable efficacy variations have been observed in terms of the route of delivery, time of MSC injection, origin of the MSCs and dosage. Furthermore, the optimization of conventional drugs combined with MSC therapies and the applications of novel cell engineering approaches requires additional research. In this review, we summarize the current evidence about the immunoregulatory mechanism of MSCs, as well as the preclinical and clinical studies of MSC-based therapy for the treatment of CTDs.