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Recent findings suggest that embryonic stem cells and stem cells derived from adult tissues, including bone marrow and umbilical cord blood, could be utilized in repair and regeneration of injured or diseased lungs. This is an exciting and rapidly moving field that holds promise as a therapeutic approach for variety of lung diseases. Although initial emphasis was on engraftment of stem cells in lung, more recent studies demonstrate that mesenchymal stem cells (MSCs) can modulate local inflammatory and immune responses in mouse lung disease models including acute lung injury and pulmonary fibrosis. Further, on the basis of initial reports of safety and efficacy following allogeneic administration of MSCs to patients with Crohn's disease or with graft-versus-host disease, a recent trial has been initiated to study the effect of MSCs in patients with chronic obstructive pulmonary disease. Notably, several recent clinical trials have demonstrated potential benefit of autologous stem cell administration in patient with pulmonary hypertension. In this review, we will describe recent advances in cell therapy with the focus on MSCs and their potential roles in lung development and repair.