Differentiation of bone marrow (BM)-derived cells into lung epithelial cells has been reported in vivo in animal models of lung injury. Most studies have used cytokeratin or surfactant protein expression as markers of BM-to-lung cell differentiation. However, concerns as to whether fusion rather than differentiation is the mechanism involved, verification of BM-derived lung cells, and inconsistent findings with different injury models mean that the differentiation potential of BM-derived cells remains unclear. We used a co-culture system, in which BM cell–lung cell fusion is prevented, to examine the ability of ‘damage’ signals released from mechanically disrupted lung tissue to induce expression of lungrelated genes in BM-derived cells in vitro. BM-derived hematopoietic progenitor cells (BM-HPCs) were co-cultured with mechanically disrupted lung tissue. Liver tissue and medium-only co-cultures were also studied as controls. BM-HPCs differentiated into myeloid cells in culture. BM-HPCs proliferated in response to soluble lung damage signals and differentiated into suspension and adherent populations with dendritic cell- and Langerhans cell-like characteristics, respectively. Induction or up-regulation of cytokeratins 7 and 18 and surfactant protein B mRNA expression occurred in the suspension, dendritic cell (DC)-like population during co-culture with lung tissue. In contrast, these genes were not induced or up-regulated in medium-only or liver co-cultures. Up-regulation of E-cadherin mRNA and protein expression also occurred in response to lung damage signals. These results confirm that signals released from damaged lung tissue can induce lung-related gene expression in BM-derived DC-like cells in the absence of cell fusion.