Introduction. Multipotent stromal cells (MSCs) are currently in clinical trials for a number of inflammatory diseases. Recent studies have demonstrated the ability of MSCs to attenuate inflammation in rodent models of acute lung injury (ALI) suggesting that MSCs may also be beneficial in treating ALI. Methods. To better understand how human MSCs (hMSCs) may act in ALI, the lungs of immunocompetent mice were exposed to lipopolysaccharide (LPS) and four hours later bone marrow derived hMSCs were delivered by oropharyngeal aspiration (OA). The effect of hMSCs on lung injury was assessed by measuring the lung wet/dry weight ratio and total protein in bronchoalveolar lavage (BAL) fluid 24 or 48 h after LPS. BAL fluid was also analyzed for the presence of inflammatory cells and cytokine expression by multiplex immunoassay. Microarray analysis of total RNA isolated from treated and untreated lungs was performed to elucidate the mechanism(s) involved in hMSC modulation of lung inflammation. Results: Administration of hMSCs significantly reduced the expression of pro-inflammatory cytokines, neutrophil counts and total protein in bronchoalveolar lavage. There was a concomitant reduction in pulmonary edema. The anti-inflammatory effects of hMSCs were not dependent on localization to the lung, as intraperitoneal administration of hMSCs also attenuated LPS-induced inflammation in the lung. Microarray analysis revealed significant induction of tumor necrosis factor (TNF) - induced protein 6 (TNFAIP6/TSG-6) expression by hMSCs 12 h after OA delivery to LPS-exposed lungs. Knockdown of TSG-6 expression in hMSCs by RNA interference abrogated most of their anti-inflammatory effects. In addition, intra-pulmonary delivery of recombinant human TSG-6 reduced LPS-induced inflammation in the lung. Conclusions: These results show that hMSCs recapitulate the observed beneficial effects of rodent MSCs in animal models of ALI and suggest that the anti-inflammatory properties of hMSCs in the lung are explained, at least in part, by activation of hMSCs to secrete TSG-6.