Craniofacial mesenchymal stem cells (MSCs), isolated from an abundant and accessible source of craniofacial tissues, possess self-renewal and multilineage differentiation potential. It has been reported that craniofacial MSCs show elevated proliferation and regeneration capacities compared to bone marrow mesenchymal stem cells (BMMSCs). Furthermore, the immunomodulatory property has generated an emerging multidisciplinary research field that translates MSC-based therapies to the clinic for the treatment of inflammatory and autoimmune diseases. Due to tremendous unmet clinical needs, it was extensively investigated how craniofacial MSCs impose their therapeutic effects, especially by interacting with immune cells. Mechanically, MSCs take advantage of a variety of pathways to regulate immune cells, including paracrine signaling such as transforming growth factor (TGF)-β and hepatocyte growth factor (HGF) pathways, and cell-cell contact Fas/FasL signaling-induced apoptosis. In return, immune cells attenuate MSC function by secreting inflammatory cytokines such as tumor necrosis factor (TNF)-α and interleukin (IL)-1β. This perspective review critically discusses the interaction of craniofacial MSCs with the immune milieu, as well as the underlying molecular mechanism contributing to the future improved therapeutic effects of craniofacial MSCs.