Achieving satisfactory reconstruction of bone remains an important goal in orthopedic and dental conditions such as bone trauma, osteoporosis, arthritis, osteonecrosis, and periodontitis. Appropriate temporal and spatial differentiation of mesenchymal stem cells (MSCs) is essential for postnatal bone regeneration. Additionally, an acute inflammatory response is crucial at the onset of bone repair, while an adaptive immune response has important implications during late bone remodeling. Various reports have indicated bidirectional interactions between MSCs and inflammatory cells or molecules. For example, inflammatory cells can recruit MSCs, direct their migration and differentiation, so as to exert anabolic effects on bone repair. Furthermore, both pro-inflammatory and anti-inflammatory cytokines can regulate MSCs properties and subsequent bone regeneration. MSCs have demonstrated highly immunosuppressive functions, such as inhibiting the differentiation of monocytes/hematopoietic precursors and suppressing the secretion of pro-inflammatory cytokines. This review emphasizes the important interactions between inflammatory stimuli, MSCs, and bone regeneration as well as the underlying regulatory mechanisms. Better understanding of these principles will provide new opportunities for promoting bone regeneration and the treatment of bone loss associated with immunological diseases.