Lung injury and fibrosis represent the most significant outcomes of severe and acute lung disorders, including COVID-19. However, there are still no effective drugs to treat lung injury and fibrosis. In this study, we report the generation of clinical-grade human embryonic stem cells (hESCs)-derived immunity- and matrix-regulatory cells (IMRCs) manufactured under good manufacturing practice (GMP) requirements, that can treat lung injury and fibrosis in vivo. We generate IMRCs through sequentially differentiating hESCs with xeno-free reagents. IMRCs possess a unique gene expression profile distinct from umbilical cord mesenchymal stem cells (UCMSCs), such as higher levels of proliferative, immunomodulatory and anti-fibrotic genes. Moreover, intravenous delivery of IMRCs inhibits both pulmonary inflammation and fibrosis in mouse models of lung injury, and significantly improves the survival rate of the recipient mice in a dose-dependent manner, likely through their paracrine functions. IMRCs are superior to both primary UCMSCs and FDA-approved pirfenidone, with an excellent efficacy and safety profile in mice, monkeys and two severely ill COVID-19 patients in our pilot study. In light of recent public health crises involving pneumonia, acute lung injury (ALI) and acute respiratory distress syndrome (ARDS), our findings indicate that IMRCs are ready for clinical trials on lung disorders.