The protective effects of hESC-derived progenitor cells were associated with decreased production of the proinflammatory cytokines TNF-␣ and IFN-␥ and maintenance of the production of the major anti-inflammatory cytokine IL-10. It was demonstrated that protection by hESC-derived progenitor cells was the result of the interaction of these cells with resident lung CD11bϩ cells. Direct interaction of hESC-derived progenitor cells with CD11bϩ cells was required to create the anti-inflammatory environment in lungs because neither injection of septic mice with d7EB-conditioned medium nor indirect co-cultures reproduced the salutary changes in the cytokine profile.