Despite great advances in perinatal care over the past 30 years, babies that are born very preterm continue to face significantly increased risks of morbidity and mortality. In particular, chronic lung disease – so called bronchpulmonary dysplasia (BPD) – is a significant burden, compromising adequate oxygenation and impairing neurodevelopment. There is no cure for BPD. Over the past several years our group has been exploring the use of stem cells derived from the placental membranes as a potential cell therapy for regenerative application. Using a variety of fetal, neonatal and adult models, we have shown that human amnion epithelial cells (hAECs) prevent and repair acute lung injury, including models of BPD-like injury. While our initial work suggested that these cells effected repair by integration into the damaged lung epithelium and differentiated into lung cells, it now appears that the cells most likely work by modulating the host immune response to injury. Specifically, we have shown that hAECs reduce leucocyte trafficking to the injured lung, modulate macrophage phenotype and stimulate T cells to differentiate into Tregs. Most excitingly, these effects do not appear to require cell-to-cell contact but instead are effected by secreted factors. If those factors could be identified then it should be possible to develop novel pharmacological therapies for BPD, and other acute lung injuries. Until then, the administration of hAECs as a cell therapy offers great promise as an autologous treatment for BPD.