Despite extensive research into the pathogenesis of acute lung injury and the acute respiratory distress syndrome (ALI/ARDS), mortality remains high at approximately 40%. Current treatment is primarily supportive, with lung-protective ventilation and a fluid conservative strategy. Pharmacologic therapies that reduce the severity of lung injury in experimental studies have not yet been translated into effective clinical treatment options. Therefore, innovative therapies are needed. Recent studies have suggested that bone-marrow-derived multipotent mesenchymal stem cells (MSC) may have therapeutic applications in multiple clinical disorders including myocardial infarction, diabetes, sepsis, hepatic and acute renal failure. Recently, MSC have been studied in several in vivo models of lung disease. This review focuses on first describing the existing experimental literature that has tested the use of MSC in models of ALI/ARDS, and then the potential mechanisms underlying their therapeutic use with an emphasis on secreted paracrine soluble factors. The review concludes with a discussion of future research directions required for potential clinical trials.