Stromal support is critical for lung homeostasis and the maintenance of an effective epithelial barrier. Despite this, previous studies have found a positive association between the number of mesenchymal stromal cells (MSCs) isolated from the alveolar compartment and human lung diseases associated with epithelial dysfunction. We hypothesised that bronchoalveolar lavage derived MSCs (BAL-MSCs) are dysfunctional and distinct from resident lung tissue MSCs (LT-MSCs). In this study, we comprehensively interrogated the phenotype and transcriptome of human BAL-MSCs and LT-MSCs. We found that MSCs were rarely recoverable from the alveolar space in healthy humans, but could be readily isolated from lung transplant recipients by bronchoalveolar lavage. BAL-MSCs exhibited a CD90Hi, CD73Hi, CD45Neg, CD105Lo immunophenotype and were bipotent, lacking adipogenic potential. In contrast, MSCs were readily recoverable from healthy human lung tissue and were CD90Hi or Lo, CD73Hi, CD45Neg, CD105Int and had full tri-lineage potential. Transcriptional profiling of the two populations confirmed their status as bona fide MSCs and revealed a high degree of similarity between each other and the archetypal bone-marrow MSC. 105 genes were differentially expressed; 76 of which were increased in BAL-MSCs including genes involved in fibroblast activation, extracellular matrix deposition and tissue remodelling. Finally, we found the fibroblast markers collagen 1A1 and α-smooth muscle actin were increased in BAL-MSCs. Our data suggests that in healthy humans, lung MSCs reside within the tissue, but in disease can differentiate to acquire a profibrotic phenotype and migrate from their in-tissue niche into the alveolar space. Stem Cells 2016;34:2548–2558.