FGF-10 can prevent or reduce lung specific inflammation due to traumatic or infectious lung injury. However, the exact mechanisms are poorly characterized. Additionally, the effect of FGF-10 on lung-resident mesenchymal stem cells (LR-MSCs) has not been studied. To better characterize the effect of FGF-10 on LR-MSCs, FGF-10 was intratracheally delivered into the lungs of rats. Three days after instillation, bronchoalveolar lavage was performed and plastic-adherent cells were cultured, characterized and then delivered therapeutically to rats after LPS intratracheal instillation. Immunophenotyping analysis of FGF-10 mobilized and cultured cells revealed expression of the MSC markers CD29, CD73, CD90, and CD105, and the absence of the hematopoietic lineage markers CD34 and CD45. Multipotency of these cells was demonstrated by their capacity to differentiate into osteocytes, adipocytes, and chondrocytes. Delivery of LR-MSCs into the lungs after LPS injury reduced the inflammatory response as evidenced by decreased wet-to-dry ratio, reduced neutrophil and leukocyte recruitment and decreased inflammatory cytokines compared to control rats. Lastly, direct delivery of FGF-10 in the lungs of rats led to an increase of LR-MSCs in the treated lungs, suggesting that the protective effect of FGF-10 might be mediated, in part, by the mobilization of LR-MSCs in lungs.