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Tissue resident mesenchymal stem cells (MSCs) are important regulators of tissue repair or regeneration, fibrosis, inflammation, angiogenesis and tumor formation. Bone marrow derived mesenchymal stem cells (BM-MSCs) and endothelial progenitor cells (EPC) are currently being considered and tested in clinical trials as a potential therapy in patients with such inflammatory lung diseases including, but not limited to, chronic lung disease, pulmonary arterial hypertension (PAH), pulmonary fibrosis (PF), chronic obstructive pulmonary disease (COPD)/emphysema and asthma. However, our current understanding of tissue resident lung MSCs remains limited. This review addresses how environmental cues impact on the phenotype and function of this endogenous stem cell pool. In addition, it examines how these local factors influence the efficacy of cell-based treatments for lung diseases.