The ability of immunomodulatory mesenchymal stromal cells (MSCs) to improve COVID-19-associated acute respiratory distress syndrome (ARDS) in clinical trials is uncertain. We assessed whether freshly cultured umbilical cord (UC)-derived MSCs improved outcomes in patients with severe COVID-19 ARDS. We enrolled 37 patients with severe COVID-19 ARDS: 15 in the phase 1 dose escalation and open label extension studies ( NCT04400032 ), and 22 patients in the phase 2b randomized clinical trial ( NCT04865107 ). Delivery of up to 270 × 10⁶ MSCs in three divided daily doses was well tolerated and resulted in qualitative improvement in all clinical outcomes. Furthermore, MSCs resulted in resolution of lymphopenia, consistent with an important immunomodulatory effect, with significant improvement in patient reported quality-of-life measures (SF-36) at 6 months pointing to possible durable clinical effects. These findings suggest a potential benefit of freshly cultured, UC-MSCs in severe COVID-19 ARDS, associated with biological evidence of favorable immunomodulatory activity.