<p>Birth defects impose a significant global health burden, driving an urgent need for improved prenatal diagnostic and therapeutic strategies. Amniotic fluid stem cells (AFSCs) have emerged as a uniquely advantageous cell source in this context. This review provides a comprehensive synthesis of the multifaceted roles of AFSCs in advancing fetal medicine. We begin by detailing their biological characteristics, including origin, heterogeneity, and markers, while highlighting how their properties are influenced by gestational and pathological factors. We then elaborate on their dual mechanisms of tissue repair, focusing on direct homing/engraftment and, predominantly, their potent paracrine and extracellular vesicle (EV)-mediated actions. The core of the review systematically examines the integrated applications of AFSCs across a clinical continuum: (1) in disease modeling, where they serve as a foundation for generating patient-specific induced pluripotent stem cells (iPSCs) and complex organoids to study genetic disorders; (2) in prenatal diagnosis, exploring their potential contribution to fetal microchimerism and cell-free fetal DNA to refine non-invasive testing; and (3) in therapeutic interventions, reviewing preclinical progress in treating conditions such as pulmonary hypoplasia, myelomeningocele, and hematopoietic diseases via transamniotic stem cell therapy (TRASCET) or EV administration. Finally, we discuss the current limitations, including standardization hurdles and mechanistic knowledge gaps and the promising future of AFSCs, underpinned by their ethical sourcing, ease of access, and strong regenerative potential. This work consolidates the evidence positioning AFSCs as a transformative, unified platform for innovating the prevention, diagnosis, and treatment of birth defects. </p> Graphical Abstract <p></p>