The aim of this study was to evaluate the efficacy of mesenchymal stem cells (MSCs) in a nitrofen-induced congenital diaphragmatic hernia (CDH) rat model. Pregnant rats were exposed to nitrofen on embryonic day 9.5 (E9.5). MSCs were isolated from the enhanced green fluorescent protein (eGFP) transgenic rat lungs. The MSCs were transplanted into the nitrofen-induced E12.5 rats via the uterine vein, and the E21 lung explants were harvested. The study animals were divided into three: the control group, the nitrofen-induced left CDH (CDH group), and the MSC-treated nitrofen-induced left CDH (MSC-treated CDH group). The specimens were morphologically analyzed using HE and immunohistochemical staining with proliferating cell nuclear antigen (PCNA), surfactant protein-C (SP-C), and α-smooth muscle actin. The alveolar and medial walls of the pulmonary arteries were significantly thinner in the MSC-treated CDH group than in the CDH group. The alveolar air space areas were larger, while PCNA and the SP-C positive cells were significantly higher in the MSC-treated CDH group, than in the CDH group. MSC engraftment was identified on immunohistochemical staining of the GFP in the MSC-treated CDH group. MSC transplantation potentially promotes alveolar and pulmonary artery development, thereby reducing the severity of pulmonary hypoplasia.