Mesenchymal stem cells (MSCs) have been successfully isolated from a broad range of adult, fetal, and other nonembryonic tissues. Fetal lung has been identified as a rich source of MSCs. However, the biological characteristics and differentiation potential of fetal lung MSCs remain to be explored. In this study, we established a series of methods for isolation and expansion of fetal lung MSCs. These MSCs could withstand more than 40 passages without obvious decline in proliferation ability, significant changes in morphology, and expression of cell markers. Flow cytometric analysis showed that fetal lung MSCs expressed CD13, CD29, CD44, CD90, CD105, CD166, and HLA-ABC, but not CD14, CD31, CD34, CD38, CD41a, CD42b, CD45, CD49d, CD61, CD106, CD133, and HLA-DR. Cell cycle analysis revealed that when the MSCs reached their log phase of growth, more than 90% of the cells were in G0/G1 phase while the proportion of cells in S phase and G2/M phase were about 5.56% and 2.08% cells, respectively. These MSCs could differentiate into neural cells in addition to their mesenchymal differentiation potential. Our data suggest that the fetal lung MSC population is an alternative source of stem cells for cell-based therapy of neurological defects or mesenchymal-originating diseases.