BACKGROUND Umbilical cord blood (UCB) has been examined for the presence of stem cells capable of differentiating into cell types of all three embryonic layers (i.e. endo-, ecto- and mesoderm). The few groups reporting success have typically confirmed endodermal potential using hepatic differentiation. We report differentiation of human UCB-derived multipotent stem cells, termed multilineage progenitor cells (MLPC), into respiratory epithelial cells (i.e. type II alveolar cells). METHODS Using a cell separation medium (PrepaCyte-MLPC; BioE Inc.) and plastic adherence, MLPC were isolated from four of 16 UCB units (American Red Cross) and expanded. Cultures were grown to 80% confluence in mesenchymal stromal cell growth medium (MSCGM; Cambrex BioScience) prior to addition of small airway growth medium (SAGM; Cambrex BioScience), an airway maintenance medium. Following a 3-8-day culture, cells were characterized by light microscopy, transmission electron microscopy, immunofluorescence and reverse transcriptase (RT)-PCR. RESULTS MLPC were successfully differentiated into type II alveolar cells (four of four mixed lines; two of two clonal lines). Differentiated cells were characterized by epithelioid morphology with lamellar bodies. Both immunofluorescence and RT-PCR confirmed the presence of surfactant protein C, a protein highly specific for type II cells. CONCLUSIONS MLPC were isolated, expanded and then differentiated into respiratory epithelial cells using an off-the-shelf medium designed for maintenance of fully differentiated respiratory epithelial cells. To the best of our knowledge, this is the first time human non-embryonic multipotent stem cells have been differentiated into type II alveolar cells. Further studies to evaluate the possibilities for both research and therapeutic applications are necessary.