Mesenchymal stem cell (MSC)-based therapies have been proven effective in experimental models of numerous disorders. Treatment of ischemic brain injury by transplantation of MSCs in neonatal animal models has been shown to be effective in reducing lesion volume and improving functional outcome. The beneficial effect of MSC transplantation to treat neonatal brain injury might be explained by the great plasticity of the neonatal brain. The neonatal brain is still in a developmentally active phase, leading to a better efficiency of MSC transplantation than that observed in experiments using adult models of stroke. Enhanced neurogenesis and axonal remodeling likely underlie the improved functional outcome following MSC treatment after neonatal hypoxic-ischemic (HI) brain injury. With respect to the mechanism of repair by MSCs, MSCs do not survive long term and replace damaged tissue themselves. We propose that MSCs react to the needs of the ischemic cerebral environment by secretion of several growth factors, cytokines, and other bioactive molecules to regulate damage and repair processes. Parenchymal cells react to the secretome of the MSCs and contribute to stimulate repair processes. These intrinsic adaptive properties of MSCs make them excellent candidates for a novel therapy to treat the devastating effects of HI encephalopathy in the human neonate.