Sepsis, which is characterized by multiple organ dysfunctions as a result of an unbalanced host-inflammatory response to pathogens, is potentially a life-threatening condition and a major cause of death in the intensive care units (ICUs). However, effective treatment or intervention to prevent sepsis-associated lethality is still lacking. Human umbilical cord mesenchymal stem cell (hUC-MSC) transplantation has been shown to have potent immunomodulatory properties and improve tissue repair yet lacks direct antibacterial and endotoxin clearance activities. In this study, we engineered hUC-MSCs to express a broad-spectrum antibacterial fusion peptide containing BPI21 and LL-37 (named BPI21/LL-37) and confirmed that the BPI21/LL-37 modification did not affect the stemness and immunoregulatory capacities of hUC-MSCs but remarkably, enhanced its antibacterial and toxin-neutralizing activities in vitro. Furthermore, we showed that administration of BPI21/LL-37-engineered hUC-MSCs significantly reduces serum levels of tumor necrosis factor α (TNF-α), interleukin 1β (IL-1β), and IL-6, whereas increases that of IL-10 in cecal ligation and puncture (CLP)-induced sepsis mouse model. Administration of BPI21/LL-37-engineered hUC-MSCs significantly reduced systemic endotoxin (lipopolysaccharide [LPS]) levels and organ bacterial load, ameliorated damage to multiple organs, and improved survival. Taken together, our study demonstrates that BPI21/LL-37-engineered hUC-MSCs might offer a novel therapeutic strategy to prevent or treat sepsis via enhanced antimicrobial and anti-inflammatory properties to preserve organ functions better.