This study aimed to explore the role and mechanism of umbilical cord mesenchymal stem cells (UCMSCs) in regulating inflammation of bronchial epithelial cells. Transforming growth factor beta-1 (TGF-β1) was used to induce inflammation in human bronchial epithelial cells. Cell proliferation was detected through CCK8 and cell apoptosis was detected by Annexin V and propidium iodide double staining. E-cadherin and α-smooth muscle actin (α-SMA) were detected by immunofluorescence, and tumor necrosis factor alpha (TNF-α) and interleukin 6 (IL-6) in culture medium supernatant were detected by ELISA. The expression of E-cadherin, α-SMA, Sonic hedgehog (Shh), Gli1 and Snail was detected by Western blot analysis. Compared with the control group, bronchial epithelial cells treated with TGF-β1 showed significantly decreased proliferation, increased apoptosis, increased secretion of TNF-α and IL-6, increased expression of α-SMA, Shh, Gli1 and Snail and decreased E-cadherin expression. However, co-culture with UCMSCs inhibited TGF-β1-induced changes in human bronchial epithelial cell proliferation, apoptosis, secretion of TNF-α and IL-6 and activation of the Hedgehog pathway. In conclusion, UCMSCs have protective effects on TGF-β1-induced inflammation in human bronchial epithelial cells by regulating the Hedgehog pathway.