Progressive pulmonary inflammation and emphysema have been implicated in the progression of chronic obstructive pulmonary disease (COPD), while current pharmacological treatments are not effective. Transplantation of bone marrow mesenchymal stem cells (MSCs) has been identified as one such possible strategy for treatment of lung diseases including acute lung injury (ALI) and pulmonary fibrosis. However, their role in COPD still requires further investigation. The aim of this study is to test the effect of administration of rat MSCs (rMSCs) on emphysema and pulmonary function. To accomplish this study, the rats were exposed to cigarette smoke (CS) for 11 weeks, followed by administration of rMSCs into the lungs. Here we show that rMSCs infusion mediates a down-regulation of pro-inflammatory mediators (TNF-α, IL-1β, MCP-1, and IL-6) and proteases (MMP9 and MMP12) in lung, an up-regulation of vascular endothelial growth factor (VEGF), VEGF receptor 2, and transforming growth factor (TGFβ-1), while reducing pulmonary cell apoptosis. More importantly, rMSCs administration improves emphysema and destructive pulmonary function induced by CS exposure. In vitro co-culture system study of human umbilical endothelial vein cells (EA.hy926) and human MSCs (hMSCs) provides the evidence that hMSCs mediates an anti-apoptosis effect, which partly depends on an up-regulation of VEGF. These findings suggest that MSCs have a therapeutic potential in emphysematous rats by suppressing the inflammatory response, excessive protease expression, and cell apoptosis, as well as up-regulating VEGF, VEGF receptor 2, and TGFβ-1. J. Cell. Biochem. 114: 323–335, 2013. © 2012 Wiley Periodicals, Inc.