Mesenchymal stromal cells (MSCs) are considered to be promising agents for the treatment of immunological disease. Although originally identified as precursor cells for mesenchymal lineages, in vitro studies have demonstrated that MSCs possess diverse immune regulatory capacities. Pre-clinical models have shown beneficial effects of MSCs in multiple immunological diseases and a number of phase 1/2 clinical trials carried out so far have reported signs of immune modulation after MSC infusion. These data indicate that MSCs play a central role in the immune response. This raises the academic question whether MSCs are immune cells or whether they are tissue precursor cells with immunoregulatory capacity. Correct understanding of the immunological properties and origin of MSCs will aid in the appropriate and safe use of the cells for clinical therapy. In this review the whole spectrum of immunological properties of MSCs is discussed with the aim of determining the position of MSCs in the immune system.