Mesenchymal stem cell (MSC) administration is known to enhance the recovery of the kidney following injury. Here we tested the potential of hypoxic-preconditioned-MSC transplantation to enhance the efficacy of cell therapy on acute kidney injury (AKI) by improving MSC migration to the injured kidney. Cobalt was used as hypoxia mimetic preconditioning (HMP). MSC were subjected to HMP through 24 h culture in 200 µmol/L cobalt. Compared to normoxia cultured MSC (NP-MSC), HMP significantly increased the expression of HIF-1α and CXCR4 in MSC and enhanced the migration of MSC in vitro. This effect was lost when MSC were treated with siRNA targeting HIF-1α or CXCR4 antagonist. SPIO labeled MSC were administered to rats with I/R injury followed immediately by magnetic resonance imaging. Imaging clearly showed that HMP-MSC exhibited greater migration and a longer retention time in the ischemic kidney than NP-MSC. Histological evaluation showed more HMP-MSC in the glomerular capillaries of ischemic kidneys than in the kidneys receiving NP-MSC. Occasional tubules showed iron labeling in the HMP group, while no tubules had iron labeling in NP group, indicating the possibility of tubular transdifferentiation after HMP. These results were also confirmed by fluorescence microscopy study using CM-DiI labeling. The increased recruitment of HMP-MSC was associated with reduced kidney injury and enhanced functional recovery. This effect was also related to the increased paracrine action by HMP-MSC. Thus we suggest that by enhancing MSC migration and prolonging kidney retention, hypoxic preconditioning of MSC may be a useful approach for developing AKI cell therapy.