The chemokine CXCL12 (SDF-1) and its cell surface receptor CXCR4 were first identified as regulators of lymphocyte trafficking to the bone marrow. Soon after, the CXCL12/CXCR4 axis was proposed to regulate the trafficking of breast cancer cells to sites of metastasis. More recently, it was established that CXCR4 plays a central role in cancer cell proliferation, invasion, and dissemination in the majority of malignant diseases. The stem cell concept of cancer has revolutionized the understanding of tumorigenesis and cancer treatment. A growing body of evidence indicates that a subset of cancer cells, referred to as cancer stem cells (CSCs), plays a critical role in tumor initiation, metastatic colonization, and resistance to therapy. Although the signals generated by the metastatic niche that regulate CSCs are not yet fully understood, accumulating evidence suggests a key role of the CXCL12/CXCR4 axis. In this review we focus on physiological functions of the CXCL12/CXCR4 signaling pathway and its role in cancer and CSCs, and we discuss the potential for targeting this pathway in cancer management.