Mesenchymal stem cells (MSCs) are multipotent cells which can proliferate and replace dead cells in the body. MSCs also secrete immunomodulatory molecules, creating a regenerative microenvironment that has an excellent potential for tissue regeneration. MSCs can be easily isolated and grown in vitro for various applications. For the past two decades, MSCs have been used in research, and many assays and tests have been developed proving that MSCs are an excellent cell source for therapy. This review focusses on quality control parameters required for applications of MSCs including colony formation, surface markers, differentiation potentials, and telomere length. Further, the specific mechanisms of action of MSCs under various conditions such as trans-differentiation, cell fusion, mitochondrial transfer, and secretion of extracellular vesicles are discussed. This review aims to underline the applications and benefits of MSCs in regenerative medicine and tissue engineering.