Intranasally delivered human cord blood-derived CD34+ hematopoietic progenitor cells have the capacity to engraft and undergo transdifferentiation to surfactant-containing alveolar epithelial type II cell-like cells in lungs of newborn mice. The aim of this study was to determine the long-term fate of such transplanted cells as well as their effects on alveolar development in neonatally injured lungs. Double transgenic CCSP+/FasL+ mice with inducible lung-specific FasL expression, targeted to induce respiratory epithelial apoptosis in the perinatal period, served as model of neonatal lung injury. Non-injured single transgenic CCSP+/FasL- littermates served as controls. Freshly isolated umbilical cord blood CD34+ cells (0.5 to 1.0×10(6)) were administered at postnatal day 5 by intranasal inoculation; sham controls received equal volume PBS. Engraftment, alveolar epithelial differentiation, lung growth, and alveolarization were evaluated one year after transplantation. Engrafted cord blood-derived cells, detected by human-specific FISH (fluorescent in situ hybridization) analysis, and cord blood-derived alveolar type II-like cells, detected by double immunofluorescence analysis, while sparse, were seen in all conditions and more frequent in double than single transgenic recipients. The total lung volume and volume of air-exchanging parenchyma, assessed by stereological volumetry, were significantly greater in CD34-treated double transgenic animals than in PBS-treated double transgenic controls. Alveolarization, assessed by histomorphometry, was equivalent in these groups. These results suggest that transdifferentiated alveolar epithelial cells, derived from cord blood CD34+ cells, can persist up to one year after intrapulmonary delivery. Cord blood-CD34+ cell administration appears to have growth-promoting effects in injured newborn lungs, without affecting alveolar development in this model.