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Mesenchymal stem cell (MSC) transplantation represents the next breakthrough in the treatment of currently intractable and devastating neonatal disorders with complex multifactorial etiologies, including bronchopulmonary dysplasia, hypoxic ischemic encephalopathy, and intraventricular hemorrhage. Absent engraftment and direct differentiation of transplanted MSCs, and the “hit-and-run” therapeutic effects of these MSCs suggest that their pleiotropic protection might be attributable to paracrine activity via the secretion of various biologic factors rather than to regenerative activity. The transplanted MSCs, therefore, exert their therapeutic effects not by acting as “stem cells,” but rather by acting as “paracrine factors factory.” The MSCs sense the microenvironment of the injury site and secrete various paracrine factors that serve several reparative functions, including antiapoptotic, anti-inflammatory, antioxidative, antifibrotic, and/or antibacterial effects in response to environmental cues to enhance regeneration of the damaged tissue. Therefore, the therapeutic efficacy of MSCs might be dependent on their paracrine potency. In this review, we focus on recent investigations that elucidate the specifically regulated paracrine mechanisms of MSCs by injury type and discuss potential strategies to enhance paracrine potency, and thus therapeutic efficacy, of transplanted MSCs, including determining the appropriate source and preconditioning strategy for MSCs and the route and timing of their administration.