Acute lung injury (ALI) and acute respiratory distress syndrome (ARDS) are characterized by pulmonary edema attributable to alveolar epithelial-interstitial-endothelial injury, associated with profound inflammation and respiratory dysfunction. The IL-33/IL-1 receptor-like-1 (ST2) axis plays a key role in the development of immune-inflammatory responses in the lung. Cell-based therapy has been recently proposed as an effective alternative for the treatment of ALI and ARDS. Here, we engineered human adipose tissue-derived mesenchymal stem cells (hASCs) overexpressing soluble IL-1 receptor-like-1 (sST2), a decoy receptor for IL-33, in order to enhance their immunoregulatory and anti-inflammatory properties when applied in a murine ALI model. We administered both hASCs and hASC-sST2 systemically at 6 hours after intranasal LPS instillation, when pathological changes had already occurred. Bioluminescence imaging, immunohistochemistry, and focused transcriptional profiling confirmed the increased presence of hASCs in the injured lungs and the activation of an immunoregulatory program (CXCR-4, tumor necrosis factor-stimulated gene 6 protein, and indoleamine 2,3-dioxygenase up-regulation) in these cells, 48 hours after endotoxin challenge. A comparative evaluation of hASCs and the actions of hASC-sST2 revealed that local sST2 overproduction by hASC-sST2 further prevented IL-33, Toll-like receptor-4, IL-1β, and IFN-γ induction, but increased IL-10 expression in the injured lungs. This synergy caused a substantial decrease in lung airspace inflammation and vascular leakage, characterized by significant reductions in protein content, differential neutrophil counts, and proinflammatory cytokine (TNF-α, IL-6, and macrophage inflammatory protein 2) concentrations in bronchoalveolar lavage fluid. In addition, hASC-sST2-treated ALI lungs showed preserved alveolar architecture, an absence of apoptosis, and minimal inflammatory cell infiltration. These results suggest that hASCs genetically engineered to produce sST2 could become a promising therapeutic strategy for ALI/ARDS management.