Umbilical cord blood transplantation (UCBT) has been an important donor source for allogeneic hematopoietic stem cell transplantation, especially for patients who lack suitable matched donors. UCBT provides unique practical advantages, such as lower risks of graft-versus-host-disease (GVHD), permissive HLA mismatch, and ease of procurement. However, there are clinical challenges in UCBT, including high infection rates and treatment-related mortality in selected patient groups. These clinical advantages and challenges are tightly linked with cell-type specific immune reconstitution (IR). Here, we will review IR, focusing on T and NK cells, and the impact of IR on clinical outcomes. Better understanding of the immune biology in UCBT will allow us to further advance this field with improved clinical practice.