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Mesenchymal stromal cells (MSCs) or their media (MSC-M) were reported to reverse acute lung injury (ALI)-induced decrease of alveolar fluid clearance. To determine the mechanisms by which MSC-M exert their beneficial effects, an in vitro model of alveolar epithelial injury was created by exposing primary rat alveolar epithelial cells (AECs) to hypoxia (3% O2) plus cytomix, a combination of IL-1β, TNF-α, and IFN-γ. MSC-M were collected from human MSCs exposed for 12 h to either normoxia (MSC-M) or to hypoxia plus cytomix (HCYT-MSC-M). This latter condition was used to model the effect of alveolar inflammation and hypoxia on paracrine secretion of MSCs in the injured lung. Comparison of paracrine soluble factors in MSC media showed that the IL-1 receptor antagonist and prostaglandin E2were markedly increased while keratinocyte growth factor (KGF) was twofold lower in HCYT-MSC-M compared with MSC-M. In AECs, hypoxia plus cytomix increased protein permeability, reduced amiloride-sensitive short-circuit current (AS- Isc), and also decreased the number of α-epithelial sodium channel (α-ENaC) subunits in the apical membrane. To test the effects of MSC media, MSC-M and HCYT-MSC-M were added for an additional 12 h to AECs exposed to hypoxia plus cytomix. MSC-M and HCYT-MSC-M completely restored epithelial permeability to normal. MSC-M, but not HCYT-MSC-M, significantly prevented the hypoxia plus cytomix-induced decrease of ENaC activity and restored apical α-ENaC channels. Interestingly, KGF-deprived MSC-M were unable to restore amiloride-sensitive sodium transport, indicating a possible role for KGF in the beneficial effect of MSC-M. These results indicate that MSC-M may be a preferable therapeutic option for ALI.