Impaired wound healing remains a challenge to date and causes debilitating effects with tremendous suffering. Recent advances in tissue engineering approaches in the area of cell therapy have provided promising treatment options to meet the challenges of impaired skin wound healing such as diabetic foot ulcers. Over the last few years, stem cell therapy has emerged as a novel therapeutic approach for various diseases including wound repair and tissue regeneration. Several different types of stem cells have been studied in both preclinical and clinical settings such as bone marrow‐derived stem cells, adipose‐derived stem cells (ASCs), circulating angiogenic cells (e.g., endothelial progenitor cells), human dermal fibroblasts, and keratinocytes for wound healing. Adipose tissue is an abundant source of mesenchymal stem cells, which have shown an improved outcome in wound healing studies. ASCs are pluripotent stem cells with the ability to differentiate into different lineages and to secrete paracrine factors initiating tissue regeneration process. The abundant supply of fat tissue, ease of isolation, extensive proliferative capacities ex vivo, and their ability to secrete pro‐angiogenic growth factors make them an ideal cell type to use in therapies for the treatment of nonhealing wounds. In this review, we look at the pathogenesis of chronic wounds, role of stem cells in wound healing, and more specifically look at the role of ASCs, their mechanism of action and their safety profile in wound repair and tissue regeneration.