Of the available regenerative treatment options, craniofacial tissue regeneration using mesenchymal stem cells (MSCs) shows promise. The ability of stem cells to produce multiple specialized cell types along with their extensive distribution in many adult tissues have made them an attractive target for applications in tissue engineering. MSCs reside in a wide spectrum of postnatal tissue types and have been successfully isolated from orofacial tissues. These dental- or orofacial-derived MSCs possess self-renewal and multilineage differentiation capacities. The craniofacial system is composed of complex hard and soft tissues derived from sophisticated processes starting with embryonic development. Because of the complexity of the craniofacial tissues, the application of stem cells presents challenges in terms of the size, shape, and form of the engineered structures, the specialized final developed cells, and the modulation of timely blood supply while limiting inflammatory and immunological responses. The cell delivery vehicle has an important role in the in vivo performance of stem cells and could dictate the success of the regenerative therapy. Among the available hydrogel biomaterials for cell encapsulation, alginate-based hydrogels have shown promising results in biomedical applications. Alginate scaffolds encapsulating MSCs can provide a suitable microenvironment for cell viability and differentiation for tissue regeneration applications. This review aims to summarize current applications of dental-derived stem cell therapy and highlight the use of alginate-based hydrogels for applications in craniofacial tissue engineering.