Cancer development is often associated with chronic inflammation. To date, research into inflammation-induced cancer has largely focused on chemokines, cytokines, and their downstream targets. These inflammatory mediators may promote tumor growth, invasion, metastasis, and facilitate angiogenesis. However, the exact mechanisms by which inflammation promotes neoplasia remain unclear. Inflammatory bowel disease (IBD) is characterized by recurrent, idiopathic intestinal inflammation, the complications of which are potentially fatal. IBD incidence in Australia is 24.2 per 100,000 and its peak onset is in people aged 15 to 24 years. Symptoms include abdominal pain, cramps, bloody stool, and persistent diarrhoea or constipation and so seriously compromise quality of life. However, due to its unknown etiology, current treatment strategies combat the symptoms rather than the disease and are limited by inefficacy, toxicity, and adverse side-effects. IBD is also associated with an increased risk of colorectal cancer, for which treatment options are similarly limited. In recent years, there has been much interest in the therapeutic potential of mesenchymal stem cells (MSCs). However, whether MSCs suppress or promote tumor development is still contentious within the literature. Many studies indicate that MSCs exert anti-tumor effects and suppress tumor growth, whereas other studies report pro-tumor effects. Studies using MSCs as treatment for IBD have shown promising results in both animal models and human trials. However, as MSC treatment is still novel, the long-term risks remain unknown. This review aims to summarize the current literature on MSC treatment of inflammation-induced cancer, with a focus on colorectal cancer resulting from IBD.