The 2019 novel coronavirus disease (COVID-19), caused by the severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), has occurred in China and around the world. SARS-CoV-2-infected patients with severe pneumonia rapidly develop acute respiratory distress syndrome (ARDS) and die of multiple organ failure. Despite advances in supportive care approaches, ARDS is still associated with high mortality and morbidity. Mesenchymal stem cell (MSC)-based therapy may be an potential alternative strategy for treating ARDS by targeting the various pathophysiological events of ARDS. By releasing a variety of paracrine factors and extracellular vesicles, MSC can exert anti-inflammatory, anti-apoptotic, anti-microbial, and pro-angiogenic effects, promote bacterial and alveolar fluid clearance, disrupt the pulmonary endothelial and epithelial cell damage, eventually avoiding the lung and distal organ injuries to rescue patients with ARDS. An increasing number of experimental animal studies and early clinical studies verify the safety and efficacy of MSC therapy in ARDS. Since low cell engraftment and survival in lung limit MSC therapeutic potentials, several strategies have been developed to enhance their engraftment in the lung and their intrinsic, therapeutic properties. Here, we provide a comprehensive review of the mechanisms and optimization of MSC therapy in ARDS and highlighted the potentials and possible barriers of MSC therapy for COVID-19 patients with ARDS.