In recent years, chimeric antigen receptor (CAR)-engineered cellular therapy has brought remarkable advancements in cancer immunotherapy and autoimmune disease treatment. CAR T-cell therapy has demonstrated high efficacy in multiple myeloma (MM), but its durability is limited due to immune suppression within the tumor microenvironment (TME). This study elucidates how cancer-associated fibroblasts (CAFs) impair BCMA CAR T-cell function, and describes development of dual-specific CAR T-cells targeting CAFs. The results showed that CAFs promoted CAR T-cell exhaustion via TGF-β, PD-L1, IL-10, and the FAS/FASL pathway. BCMA-FAP and BCMA-CS1 CAR T cells exhibited enhanced cytotoxicity against MM cells and CAFs, overcoming TME-mediated suppression. E-cadherin-targeting CAR MSCs (Ecad CAR-MSCs) to address graft-versus-host disease (GvHD) were also developed for this study. These CAR MSCs significantly reduced GvHD by selectively accumulating in the intestinal epithelium, suppressing T-cell activation via IL-10 and galectin-9 while promoting Treg induction. These findings suggest that CAF-targeting dual-specific CAR T cells enhance the efficacy of MM immunotherapy, while Ecad CAR-MSCs offer a novel approach to treating GvHD. These approaches hold promise for clinical translation to improve outcomes in cellular therapy.