Studies of the regenerating hematopoietic system have led to the definition of many of the fundamental principles of stem cell biology. Therapies based on a range of tissue stem cells have been widely touted as a new treatment modality, presaging an emerging new specialty called regenerative medicine that promises to harness stem cells from embryonic and somatic sources to provide replacement cell therapies for genetic, malignant, and degenerative conditions. Insights borne from stem cell biology also portend development of protein and small molecule therapeutics that act on endogenous stem cells to promote repair and regeneration. Much of the newfound enthusiasm for regenerative medicine stems from the hope that advances in the laboratory will be followed soon thereafter by breakthrough treatments in the clinic. But how does one sort through the hype to judge the true promise? Are stem cell biologists and the media building expectations that cannot be met? Which diseases can be treated, and when can we expect success? In this review, we outline the realms of investigation that are capturing the most attention, and consider the current state of scientific understanding and controversy regarding the properties of embryonic and somatic (adult) stem cells. Our objective is to provide a framework for appreciating the promise while at the same time understanding the challenges behind translating fundamental stem cell biology into novel clinical therapies.