Neonatal hyperoxia impairs vascular and alveolar growth in mice and decreases endothelial progenitor cells. To determine the role of bone marrow-derived cells in restoration of neonatal lung structure after injury, we studied a novel bone marrow myeloid progenitor cell population from Tie2-green fluorescent protein (GFP) transgenic mice (bone marrow-derived angiogenic cells; BMDAC). We hypothesized that treatment with BMDAC would restore normal lung structure in infant mice during recovery from neonatal hyperoxia. Neonatal mice (1-day-old) were exposed to 80% oxygen for 10 days. BMDACs (1 x 10(5)), embryonic endothelial progenitor cells, mouse embryonic fibroblasts (control), or saline were then injected into the pulmonary circulation. At 21 days of age, saline-treated mice had enlarged alveoli, reduced septation, and a reduction in vascular density. In contrast, mice treated with BMDAC had complete restoration of lung structure that was indistinguishable from room air controls. BMDAC comprised 12% of distal lung cells localized to pulmonary vessels or alveolar type II (AT2) cells and persist (8.8%) for 8 wk postinjection. Coculture of AT2 cells or lung endothelial cells (luEC) with BMDAC augmented AT2 and luEC cell growth in vitro. We conclude that treatment with BMDAC after neonatal hyperoxia restores lung structure in this model of bronchopulmonary dysplasia.