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Multiple studies have established the beneficial role of mesenchymal stem cell (MSC) therapy for kidney injury. In this review we will discuss the recent identification of Gli1 as a marker for perivascular MSC and the role of this cell population in kidney fibrosis.Recent studies demonstrate that expression of the hedgehog transcriptional activator Gli1 specifically marks perivascular MSC. Genetic fate tracing of MSC in kidney injury revealed their contribution to the myofibroblast pool whereas ablation of MSC reduced kidney fibrosis. Furthermore, strong evidence suggests that pharmacologically targeting Gli proteins inhibits cell-cycle progression of myofibroblasts in kidney fibrosis and is a promising therapeutic strategy in chronic kidney disease.Although there is tremendous excitement about MSC as cellular therapy in kidney injury it has been shown that resident perivascular MSC are a major source of myofibroblasts and a novel therapeutic target in kidney fibrosis. While resident kidney MSC might also be involved in capillary rarefaction after injury and during fibrosis progression their potential role in kidney repair, angiogenesis, and regeneration remains unclear. Further studies are needed to identify the molecular pathways that control the profibrotic versus proregenerative role of resident MSC in kidney injury and repair.