Background: Mesenchymal stem cells particularly those derived from bone marrow (BM-MSCs) exhibit self-renewal as well as trilineage differentiation capabilities. These cells are considered for cell therapy in several medical disorders. Cyclophosphamide is a well-known immunosuppressive drug, it has a potential pulmonary damage effect in humans and animals. Therefore, the aim of this study is to investigate the immunomodulatory effects of BM-MSCs in cyclophosphamide (CP)-induced lung damage of rats. Material and Methods: A total number of 40 female rats were divided into 4 groups (A, B, C &D). Group (A) served as a control group, this group was administered intraperitoneal sterile normal saline for 10 d, (10 animals). Thirty rats were treated with intraperitoneal cyclophosphamide at 70 mg/kg BW/d for 3 d, then equally subdivided into three subgroups (B, C, D): Group B (sacrificed after three days). Group C (Auto healing) was left without treatment for ten days. Group D (MSCs treated) was treated on the 4 th and 10 th days with male BM-derived MSCs in a dose of 3X106/KG BW, by intraperitoneal injection. After ten days animals were sacrificed, lung tissue was obtained and processed for light microscopy exam, and samples were taken to -80 for RNA extraction. The genes expression was estimated by real-time qPCR and the proteins were detected by immunohistochemistry. Results: BM-MSCs ameliorated the damaged lung. They reverted the mRNA levels of p53, caspase3, band cl2 more/less similar to those of the control group. Upregulation of the mRNA level of VEGF was noticed after BM-MSCs injection. Also, BM-MSCs exerted significant down-regulation of CD14, CD21, Akt and PI3K proteins expression after CP-induced upregulation of these proteins. Conclusion:This study confirmed that MSCs were ameliorating pulmonary inflammatory and fibrotic changes through their immunomodulatory effects, thus they are considered to be very promising pharmacological therapy for CP-induced lung toxicity.