Mesenchymal stem cells (MSCs), a distinct population of adult stem cells, have amassed significant interest from both medical and scientific communities. An inherent multipotent differentiation potential offers a cell therapy option for various diseases, including those of the musculoskeletal, neuronal, cardiovascular and pulmonary systems. MSCs also secrete an array of paracrine factors implicated in the mitigation of pathological conditions through anti-inflammatory, anti-apoptotic and immunomodulatory mechanisms. The safety and efficacy of MSCs in human application have been confirmed through small- and large-scale clinical trials. However, achieving the optimal clinical benefit from MSC-mediated regenerative therapy approaches is entirely dependent upon adequate understanding of their healing/regeneration mechanisms and selection of appropriate clinical conditions. MSC-mediated acute alveolar injury repair. A cartoon depiction of an injured alveolus with associated inflammation and AEC apoptosis. Proposed routes of MSC delivery into injured alveoli could be by either intratracheal or intravenous routes, for instance. Following delivery a proposed mechanism of MSC action is to inhibit/reduce alveolar inflammation by abrogation of IL-1_-depenedent Tlymphocyte proliferation and suppression of TNF-_ secretion via macrophage activation following on from stimulation by MSC-secreted IL-1 receptor antagonist (IL-1RN). The inflammatory environment also stimulates MSC to secrete prostaglandin-E2 (PGE2) which can stimulate activated macrophages to secrete the anti-inflammatory cytokine IL-10. Inhibition of AEC apoptosis following injury can also be promoted via MSC stimulated up-regulation of the anti-apoptotic Bcl-2 gene. MSC-secreted KGF can stimulate AECII proliferation and migration propagating alveolar epithelial restitution. Alveolar structural engraftment of MSC is a rare event.