Until recently, the complexity of adipose tissue and its physiological role was not well appreciated. This changed with the discovery of adipokines such as leptin. The cellular composition of adipose tissue is heterogeneous and changes as a function of diabetes and disease states such as diabetes. Tissue engineers view adipose tissue as a rich source of adult stromal/stem cells isolated by collagenase digestion. In vitro and in vivo studies have documented that adipose stromal/stem cells are multipotent, with the ability to differentiate along the adipocyte, chondrocyte, osteoblast and other lineage pathways. The adipose stromal/stem cells secrete a wide range of cytokines and growth factors with potential paracrine actions. Furthermore, adipose stromal/stem cells exert immunomodulatory functions when added to mixed lymphocyte reactions, suggesting that they can be transplanted allogeneically. This review article focuses on these mechanisms of adipose stromal/stem cell action and their potential utility as cellular therapeutics.