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Bronchopulmonary dysplasia (BPD) is a common chronic lung disease in premature babies, especially affecting those with very low or extremely low birth weights. Survivors experience adverse lung and neurological defects including cognitive dysfunction. This impacts the prognosis of children with BPD and may result in developmental delays. The currently available options for the treatment of BPD are limited owing to low efficacy or several side effects; therefore, there is a lack of effective treatments for BPD. The treatment for BPD must help in the repair of damaged lung tissue and promote further growth of the lung tissue. In recent years, the emergence of stem cell therapy, especially mesenchymal stem cell (MSC) therapy, has improved the treatment of BPD to a great extent. This article briefly reviews the advantages, research progress, and challenges faced with the use of MSCs in the treatment of BPD. Stem cell therapy is beneficial as it repairs damaged tissues by reducing inflammation, fibrosis, and by acting against oxidative stress damage. Experimental trials have also proven that MSCs provide a promising avenue for BPD treatment. However, there are challenges such as the possibility of MSCs contributing to tumorous growths, the presence of heterogeneous cell populations resulting in variable efficacy, and the ethical considerations regarding the use of this treatment in humans. Therefore, more research must be conducted to determine whether MSC therapy can be approved as a treatment option for BPD. [ABSTRACT FROM AUTHOR]