Diabetic nephropathy (DN) is the most common microvascular complications of diabetes and serves as a leading cause of end-stage renal disease, which is caused by complex mechanisms, including cellular damage induced by hyperglycemia, dysregulated inflammatory and immune responses, renal fibrosis, and vascular injury. Although conventional treatments can delay the progress of the disease, they often fail to effectively halt the irreversible deterioration of renal function. Consequently, exploring practical and effective therapeutic strategies is a key issue that needs to be urgently addressed. In recent years, mesenchymal stem cells (MSCs) and their exosomes have garnered significant research interest due to their capacities for self-renewal and multi-lineage differentiation. Preclinical studies indicate that MSCs exhibit potential in restoring renal structure and function through various mechanisms, such as cytoprotection, modulation of inflammation and immune responses, inhibition of fibrosis, epigenetic regulation, and regulation of the gut–kidney axis. Multiple administration routes, including intravenous, renal arterial, and local injection, have demonstrated considerable therapeutic efficacy. Nonetheless, clinical research remains in the nascent stages, with only small-scale trials and case reports indicating that the MSCs have certain potential for renal protection. Their long-term safety, standardized treatment regimens, and the efficacy differences among MSCs from different sources still require further research and verification.