Human embryonic stem cells are pluripotent cells derived from the inner cell mass of preimplantation stage embryos. Their unique potential to give rise to all differentiated cell types has generated great interest in stem cell research and the potential that it may have in developmental biology, medicine and pharmacology. The main focus of stem cell research has been on cell therapy for pathological conditions with no current methods of treatment, such as neurodegenerative diseases, cardiac pathology, retinal dysfunction and lung and liver disease. The overall aim is to develop methods of application either of pure cell populations or of whole tissue parts to the diseased organ under investigation. In the field of pulmonary research, studies using human embryonic stem cells have succeeded in generating enriched cultures of type II pneumocytes in vitro. On account of their potential of indefinite proliferation in vitro, embryonic stem cells could be a source of an unlimited supply of cells available for transplantation and for use in gene therapy. Uncovering the ability to generate such cell types will expand our understanding of biological processes to such a degree that disease understanding and management could change dramatically.