Multipotent mesenchymal stem (stromal) cells (MSCs) have shown promising therapeutic effects in preclinical models of both acute respiratory distress syndrome (ARDS) and sepsis. Although initial research focused on the ability of MSCs to engraft at sites of tissue injury, increasing evidence suggests that MSCs have their therapeutic effects through mechanisms unrelated to long-term incorporation into host tissue. One of the most compelling of these pathways is the ability of MSCs to interact with injured tissue through the release of soluble bioactive factors. This Review provides an overview of the general properties of MSCs, and then outlines ways in which the paracrine effects of MSCs might reduce lung injury and enhance lung repair in ARDS and sepsis. Finally, we summarise ongoing challenges in MSC research and identify areas in which the discipline might progress in the coming years.