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Sepsis is the main cause of morbidity and mortality in neonates. Mesenchymal stromal cells (MSCs) are potent immune-modulatory cells. Their effect in neonatal sepsis has never been explored. We hypothesized that human umbilical cord-derived MSCs (hUC-MSCs) improve survival in experimental neonatal sepsis. Sepsis was induced in 3-day-old rats by intravenous injection of Escherichia coli (5 × 10 5 /rat). One hour after infection, rats were treated intravenously with normal saline, hUC-MSCs, or with interferon-γ preconditioned hUC-MSCs (10 7 cells/kg). Eighteen hours after infection, survival, bacterial counts, lung neutrophil and macrophage influx, phagocytosis and apoptosis of splenocytes plasma, and LL-37 concentration were evaluated. Animals were observed for survival for 72 h after E. coli injection. Treatment with either hUC-MSCs or preconditioned hUC-MSCs significantly increased survival (hUC-MSCs, 81%; preconditioned hUC-MSCs, 89%; saline, 51%; P < 0.05). Both hUC-MSCs and preconditioned hUC-MSCs enhanced bacterial clearance. Lung neutrophil influx was decreased with preconditioned hUC-MSCs. The number of activated macrophages (CD206 + ) in the spleen was increased with hUC-MSCs and preconditioned hUC-MSCs; preconditioned hUC-MSCs increased the phagocytic activity of CD206 + macrophages. hUC-MSCs and preconditioned hUC-MSCs decreased splenocyte apoptosis in E. coli infected rats. Finally, LL-37 plasma levels were elevated in neonatal rats treated with hUC-MSCs or preconditioned hUC-MSCs. hUC-MSCs enhance survival and bacterial clearance in experimental neonatal sepsis. hUC-MSCs may be an effective adjunct therapy to reduce neonatal sepsis-related morbidity and mortality.