34Lung injury and fibrosis represent the most significant outcomes of severe and acute lung disorders, 35including COVID-19. However, there are still no effective drugs to treat lung injury and fibrosis. In this 36 study, we report the generation of clinical-grade human embryonic stem cells (hESCs)-derived 37 immunity-and matrix-regulatory cells (IMRCs) manufactured under good manufacturing practice (GMP) 38 requirements, that can treat lung injury and fibrosis in vivo. We generate IMRCs through sequentially 39 differentiating hESCs with xeno-free reagents. IMRCs possess a unique gene expression profile distinct 40 from umbilical cord mesenchymal stem cells (UCMSCs), such as higher levels of proliferative, 41 immunomodulatory and anti-fibrotic genes. Moreover, intravenous delivery of IMRCs inhibits both 42 pulmonary inflammation and fibrosis in mouse models of lung injury, and significantly improves the 43 survival rate of the recipient mice in a dose-dependent manner, likely through their paracrine functions. 44IMRCs are superior to both primary UCMSCs and FDA-approved pirfenidone, with an excellent efficacy 45 and safety profile in mice, monkeys and two severely ill COVID-19 patients in our pilot study. In light 46 of recent public health crises involving pneumonia, acute lung injury (ALI) and acute respiratory distress 47 alveolar epithelial cells and capillary endothelial cells caused by various direct and indirect injury factors, 54 resulting in diffuse pulmonary interstitial and alveolar edema, and acute hypoxic respiratory insufficiency. 55Pathophysiologically, its characteristics include decreased lung volume, decreased lung extensibility and 56 imbalance of the ventilation / blood flow ratio. When ALI develops into the severe stage (oxygenation 57 index < 200), it is called acute respiratory distress syndrome (ARDS). Globally, there are more than 3 58 million patients with ARDS annually, accounting for 10% of intensive care unit (ICU) admissions 2 . ALI 59 / ARDS patients have an average mortality rate of 35-46% 3,4 . In late ARDS, pulmonary fibrosis (PF) 60 develops due to persistent alveolar injury, repeated destruction, repair, reconstruction and over-61 deposition of extracellular matrix (ECM) 5 , leading to progressive lung scars and common interstitial 62 pneumonia. In general, idiopathic pulmonary fibrosis (IPF) patients show very poor prognosis, with a 63 median survival time of 3-5 years after diagnosis 6 . It has also been reported that the degree of pulmonary 64 fibrosis is closely related to the mortality of ARDS 7,8 . Importantly, there are still no effective FDA-65 approved drugs to treat ALI, ARDS or IPF hitherto, and most of the experimental drugs are still in Phase 66 II or Phase III studies 2, 9,10 . 67Stem cell therapy is an emerging treatment modality being used to cure various inflammatory and/or 68 degenerative diseases, including ALI and PF. In particular, mesenchymal stem cells (MSCs) have been 69 tested as an intravenous infusion therapy for ALI and PF 11,12 . Preclinical and cl...