Bronchopulmonary dysplasia (BPD) is a chronic lung disease primarily affecting premature infants who require mechanical ventilation and oxygen support. Despite advancements in neonatal care, the incidence of BPD remains substantial, especially in infants born before 29 weeks of gestation. This chapter explores the pathophysiology of BPD, focusing on the premature lung’s structural immaturity and its vulnerability to oxygen and mechanical ventilation-induced damage, oxidative stress, and fibrosis. It also provides an overview of mesenchymal stem cell (MSC) therapy, which has emerged as a potential treatment for mitigating inflammation, enhancing lung repair, and reducing fibrotic changes. Preclinical studies in animal models demonstrate the efficacy of MSCs in restoring lung function, promoting alveolarization, and reducing inflammation. The chapter also discusses the results of early clinical trials, highlighting the safety and potential benefits of MSC-based treatments in BPD. As research continues to advance, MSC therapy offers a promising, innovative approach to managing this complex and challenging condition in premature infants. While MSC therapy shows great promise, it is still in its early stages of clinical application. Most clinical trials have reported favorable safety profiles in infants, but caution is crucial to prevent potential risks to these vulnerable patients. Future research should focus on optimizing treatment protocols, exploring long-term outcomes, and ensuring rigorous safety measures to fully unlock the therapeutic potential of MSCs in BPD management.