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Bone-marrow derived mesenchymal stromal cells (MSCs) have potent immunomodulatory and tissue reparative properties, which may be beneficial in the treatment of inflammatory diseases such as COPD. This study examined the mechanisms by which human MSCs protect against elastase induced emphysema. Using a novel human relevant pre-clinical model of emphysema the efficacy of human MSC therapy and optimal cell dose were investigated. Protective effects were examined in the lung through histological examination. Further in vivo experiments examined the reparative abilities of MSCs after tissue damage was established and the role played by soluble factors secreted by MSCs. The mechanism of MSC action was determined in using shRNA gene knockdown. Human MSC therapy and MSC conditioned media exerted significant cytoprotective effects when administered early at the onset of the disease. These protective effects were due to significant anti-inflammatory, anti-fibrotic and anti-apoptotic mechanisms, mediated in part through MSC production of hepatocyte growth factor (HGF). When MSC administration was delayed, significant protection of the lung architecture was observed but this was less extensive. MSC cell therapy was more effective than MSC conditioned medium in this emphysema model.