Bronchopulmonary dysplasia (BPD) is a major cause of substantial lifelong morbidity in preterm infants. Despite a better understanding of the pathophysiology of BPD and significant research effort into its management, there remains today no effective treatment. Cell-based therapy is a novel approach that offers much promise in the prevention and treatment of BPD. Recent research supports a therapeutic role for cell transplantation in the management of a variety of acute and chronic adult and childhood lung diseases, with potential of such therapy to reduce inflammation and prevent acute lung injury. However, considerable uncertainties remain regarding cell therapies before they can be established as safe and effective clinical treatments for BPD. This review summarizes the current literature investigating cell therapies in lung disease, with particular focus on the various types of cells available and their specific properties in the context of a future therapy for BPD.