Alveolar epithelial integrity is dependent upon the alveolar milieu, yet the milieu of the damaged alveolar epithelial cell type 2 (AEC2) has been little studied. Characterization of its components may offer the potential for ex vivo manipulation of stem cells to optimize their therapeutic potential. We examined the cytokine profile of AEC2 damage milieu, hypothesizing that it would promote endogenous epithelial repair while recruiting cells from other locations and instructing their engraftment and differentiation. Bronchoalveolar lavage and lung extract from hyperoxic rats represented AEC2 in vivo damage milieu, and medium from a scratch-damaged AEC2 monolayer represented in vitro damage. CINC-2 and ICAM, the major cytokines detected by proteomic cytokine array in AEC2 damage milieu, were chemoattractive to normoxic AECs and expedited in vitro wound healing, which was blocked by their respective neutralizing antibodies. The AEC2 damage milieu was also chemotactic for exogenous uncommitted human amniotic fluid stem cells (hAFSCs), increasing migration greater than 20-fold. hAFSCs attached within an in vitro AEC2 wound and expedited wound repair by contributing cytokines migration inhibitory factor and plasminogen activator inhibitor 1 to the AEC2 damage milieu, which promoted wound healing. The AEC2 damage milieu also promoted differentiation of a subpopulation of hAFSCs to express SPC, TTF-1, and ABCA3, phenotypic markers of distal alveolar epithelium. Thus, the microenvironment created by AEC2 damage not only promotes autocrine repair but also can attract uncommitted stem cells, which further augment healing through cytokine secretion and differentiation.Keywords: AEC2; amniotic fluid stem cells; epithelial damage; CINC-2; ICAM The functional role of the alveolar epithelial cell type 2 (AEC2) has expanded over the years from a surfactant factory to an immunomodulator of the alveolus (1). AEC2s express toll receptors, which play an important role in innate host defense of the lung (2). Surfactant secreted by AEC2s not only lowers surface tension and promotes compliance but also acts as a barrier and as a source of proteins that modify inflammatory signaling in the alveolus (3). Human lung diseases, such as fatal respiratory distress syndrome in the neonatal period and interstitial lung disease of later onset, have been linked to mutations in surfactant protein-C (SP-C) (4). In addition, AEC2s are the putative resident alveolar progenitors that can replace damaged AEC1s after injury (5). Maintenance of a functional population of AEC2s is therefore critical for normal lung alveolar function, homeostasis, and repair.The observation that damaged AEC2 monolayers can repair themselves in vitro in the absence of serum or exogenous growth factors (6) suggests that autocrine modification of the AEC2 milieu promotes alveolar epithelial repair. We have shown previously that exogenous human amniotic fluid stem cells (hAFSCs), when delivered by tail vein injection to mice, can target damaged pulmonary alveolar epithelium, ...