Immunity-and-matrix-regulatory cells (IMRCs) derived from human embryonic stem cells have unique abilities in modulating immunity and regulating the extracellular matrix, which could be mass-produced with stable biological properties. Despite resemblance to mesenchymal stem cells (MSCs) in terms of self-renew and tri-lineage differentiation, the ability of IMRCs to repair the meniscus and the underlying mechanism remains undetermined. Here, we showed that IMRCs demonstrated stronger immunomodulatory and pro-regenerative potential than umbilical cord MSCs when stimulated by synovial fluid from patients with meniscus injury. Following injection into the knees of rabbits with meniscal injury, IMRCs enhanced endogenous fibrocartilage regeneration. In the dose-escalating phase I clinical trial (NCT03839238) with eighteen patients recruited, we found that intra-articular IMRCs injection in patients was safe over 12 months post-grafting. Furthermore, the effective results of magnetic resonance imaging (MRI) of meniscus repair and knee functional scores suggested that 5 × 10⁷ cells are optimal for meniscus injury treatment. In summary, we present the first report of a phase I clinical trial using IMRCs to treat meniscus injury. Our results demonstrated that intra-articular injection of IMRCs is a safe and effective therapy by providing a permissive niche for cartilage regeneration.