Fetal stem cells can be isolated from fetal blood and bone marrow as well as from other fetal tissues, including liver and kidney. Fetal blood is a rich source of haemopoietic stem cells (HSC), which proliferate more rapidly than those in cord blood or adult bone marrow. First trimester fetal blood also contains a population of non-haemopoietic mesenchymal stem cells (MSC), which support haemopoiesis and can differentiate along multiple lineages. In terms of eventual downstream application, both fetal HSC and MSC have advantages over their adult counterparts, including better intrinsic homing and engraftment, greater multipotentiality and lower immunogenicity. Fetal stem cells are less ethically contentious than embryonic stem cells and their differentiation potential appears greater than adult stem cells. Fetal stem cells represent powerful tools for exploring many aspects of cell biology and hold considerable promise as therapeutic tools for cell transplantation and ex vivo gene therapy.