Mesenchymal stem cells (MSCs) are emerging as a therapeutic modality in various inflammatory disease states. A number of ongoing randomized Phase I/II clinical trials are evaluating the effects of allogeneic MSC infusion in patients with multiple sclerosis, graft-versus-host disease, Crohn's disease, and severe chronic myocardial ischemia. MSCs are also being considered as a potential therapy in patients with inflammatory lung diseases. Several studies, including our own, have demonstrated compelling benefits from the administration of MSCs in animal models of lung injury. These studies are leading to growing interest in the therapeutic use of MSCs in inflammatory lung diseases. In this Review, we describe how the immunoregulatory effects of MSCs can confer substantial protection in the setting of lung diseases such as acute lung injury, chronic obstructive pulmonary disease, asthma, and pulmonary hypertension. We also address potential pitfalls related to the therapeutic use of MSCs in fibrotic lung diseases such as idiopathic pulmonary fibrosis. In addition, we identify emerging areas for MSC- based therapies in modulating oxidative stress and in attenuating inflammation in alcohol-related acute lung injury.