This review will critically evaluate recent findings suggesting that embryonic stem cells and stem cells derived from adult tissues, including bone marrow and umbilical cord blood, may be utilized in repair and regeneration of injured or diseased lungs. This is an exciting and rapidly moving field that holds promise as a novel therapeutic approach for cystic fibrosis and other lung diseases. However, while early studies suggested substantial lung remodeling, particularly with bone marrow-derived cells, more recent findings suggest that engraftment of adult marrow-derived cells in lung is a rare event of uncertain significance. Most recently, it has been suggested that a more relevant role of adult marrow-derived stem cells in lung is modulation of local inflammatory and immune responses. This review will also describe recent advances in understanding of local stem and progenitor cells in lung and their roles in lung development and repair.