Osteoarthritis, as a degenerative disease, is a common problem and results in high socioeconomic costs and rates of disability. The most commonly affected joint is the knee and characterized by progressive destruction of articular cartilage, loss of extracellular matrix, and progressive inflammation. Mesenchymal stromal cell (MSC)-based therapy has been explored as a new regenerative treatment for knee osteoarthritis in recent years. However, the detailed functions of MSC-based therapy and related mechanism, especially of cartilage regeneration, have not been explained. Hence, this review summarized how to choose, authenticate, and culture different origins of MSCs and derived exosomes. Moreover, clinical application and the latest mechanistical findings of MSC-based therapy in cartilage regeneration were also demonstrated.