Morbidity and mortality have declined only modestly in patients with clinical acute lung injury (ALI) and acute respiratory distress syndrome (ARDS), despite extensive research into the pathophysiology. Current treatment remains primarily supportive with lung-protective ventilation and a fluid conservative strategy. Pharmacologic therapies that reduce the severity of lung injury in preclinical models have not yet been translated to effective clinical treatment options. Consequently, further research in translational therapies is needed. Cell-based therapy with mesenchymal stem cells (MSCs) is one attractive new therapeutic approach. MSCs have the capacity to secrete multiple paracrine factors that can regulate endothelial and epithelial permeability, decrease inflammation, enhance tissue repair, and inhibit bacterial growth. This review will focus on recent studies, which support the potential therapeutic use of MSCs in ALI/ARDS, with an emphasis on the role of paracrine soluble factors.