Recent studies suggest that bone marrow (BM)-derived stem cells have therapeutic efficacy in neonatal hyperoxia-induced lung injury (HILI). c-kit, a tyrosine kinase receptor that regulates angiogenesis, is expressed on several populations of BM-derived cells. Preterm infants exposed to hyperoxia have decreased lung angiogenesis. Here we tested the hypothesis that administration of BM-derived c-kit(+) cells would improve angiogenesis in neonatal rats with HILI. To determine whether intratracheal (IT) administration of BM-derived c-kit(+) cells attenuates neonatal HILI, rat pups exposed to either normobaric normoxia (21% O2) or hyperoxia (90% O2) from postnatal day (P) 2 to P15 were randomly assigned to receive either IT BM-derived green fluorescent protein (GFP)(+) c-kit(-) cells (PL) or BM-derived GFP(+) c-kit(+) cells on P8. The effect of cell therapy on lung angiogenesis, alveolarization, pulmonary hypertension, vascular remodeling, cell proliferation, and apoptosis was determined at P15. Cell engraftment was determined by GFP immunostaining. Compared to PL, the IT administration of BM-derived c-kit(+) cells to neonatal rodents with HILI improved alveolarization as evidenced by increased lung septation and decreased mean linear intercept. This was accompanied by an increase in lung vascular density, a decrease in lung apoptosis, and an increase in the secretion of proangiogenic factors. There was no difference in pulmonary vascular remodeling or the degree of pulmonary hypertension. Confocal microscopy demonstrated that 1% of total lung cells were GFP(+) cells. IT administration of BM-derived c-kit(+) cells improves lung alveolarization and angiogenesis in neonatal HILI, and this may be secondary to an improvement in the lung angiogenic milieu.