Necrotizing enterocolitis (NEC) is one of the most severe gastrointestinal diseases affecting premature infants. It has been shown that NEC is associated with disrupted intestinal barrier and dysregulated endoplasmic reticulum (ER)‐stress response. It has also been shown that stem cells derived from amniotic fluid (AFSC) rescued intestinal injury in experimental NEC. Herein, we hypothesized that the beneficial effects of AFSC in the injured intestine are due to the restoration of intestinal barrier function. We evaluated intestinal barrier function using an ex vivo intestinal organoid model of NEC. We found that AFSC restored the expression and localization of tight junction proteins in intestinal organoids, and subsequently decreased epithelial permeability. AFSC rescued tight junction expression by inducing a protective ER stress response that prevents epithelial cell apoptosis in injured intestinal organoids. Finally, we validated these results in our experimental mouse model of NEC and confirmed that AFSC induced sustained ER stress and prevented intestinal apoptosis. This response led to the restoration of tight junction expression and localization, which subsequently reduced intestinal permeability in NEC pups. These findings confirm that intestinal barrier function is disrupted during NEC intestinal injury, and further demonstrate the disruption can be reversed by the administration of AFSC through the activation of the ER stress pathway. This study provides insight into the pathogenesis of NEC and highlights potential therapeutic targets for the treatment of NEC.