While multipotent mesenchymal stromal cells have been recently isolated from adult lung (L-MSCs), there is very limited data on their biological properties and therapeutic potential in vivo. How L-MSCs compare with bone marrow-derived MSCs (BM-MSCs) is also unclear. In this study, we characterized L-MSC phenotype, clonogenicity, and differentiation potential, and compared L-MSCs to BM-MSCs in vivo survival, retention, paracrine gene expression, and repair or elastase injury after transplantation. L-MSCs were highly clonogenic, frequently expressed aldehyde dehydrogenase activity, and differentiated into osteocytes, chondrocytes, adipocytes, myofibroblasts, and smooth muscle cells. After intravenous injection (2 h), L-MSCs showed greater survival than BM-MSCs; similarly, L-MSCs were significantly more resistant than BM-MSCs to anchorage independent culture (4 h) in vitro. Long after transplantation (4 or 32 days), a significantly higher number of CD45neg L-MSCs were retained than BM-MSCs. By flow cytometry, L-MSCs expressed more intercellular adhesion molecule-1 (ICAM-1), platelet derived growth factor receptor alpha (PDGFRα), and integrin α2 than BM-MSCs; these proteins were found to modulate endothelial adherence, directional migration, and migration across Matrigel in L-MSCs. Further, L-MSCs with low ICAM-1 showed poorer lung retention and higher phagocytosis in vivo. Compared with BM-MSCs, L-MSCs expressed higher levels of several transcripts (e.g., Ccl2, Cxcl2, Cxcl10, IL-6, IL-11, Hgf, and Igf2) in vitro, although gene expression in vivo was increased by L-MSCs and BM-MSCs equivalently. Accordingly, both L-MSCs and BM-MSCs reduced elastase injury to the same extent. This study demonstrates that tissue-specific L-MSCs possess mechanisms that enhance their lung retention after intravenous transplantation, and produce substantial healing of elastase injury comparable to BM-MSCs.