Transplantation of mesenchymal stem cells (MSCs) holds great promise in the repair of cigarette smoke (CS)-induced lung damage in chronic obstructive pulmonary disease (COPD). As cigarette smoke leads to mitochondrial dysfunction, we therefore aimed to investigate the potential benefit of mitochondrial transfer from human-induced pluripotent stem cell-derived mesenchymal stem cells (iPSC-MSCs) to CS-exposed airway epithelial cells in vitro and in vivo. Rats were exposed to 4% CS for one hour daily for 56 days. At day 29 and day 43, human iPSC-MSCs or adult bone marrow-MSCs (BM-MSCs) were administered intravenously to CS-exposed rats. CS-exposed rats exhibited severe alveolar destruction with a higher mean linear intercept (Lm) than sham air-exposed rats (p < 0.001) that was attenuated in the presence of iPSC-MSCs or BM-MSCs (p < 0.01). The attenuation of Lm value and the severity of fibrosis was greater in the iPSC-MSC-treated group than the BM-MSC-treated group (p<0.05). This might be contributed to the novel observation of mitochondrial transfer from MSCs to rat airway epithelial cells in lung sections exposed to CS. In vitro studies further revealed that transfer of mitochondria from iPSC-MSCs to bronchial epithelial cells (BEAS-2B) was more effective than from BM-MSCs with preservation of adenosine triphosphate contents. This distinct mitochondrial transfer occurred via the formation of tunneling nanotubes (TNT). Inhibition of TNT formation blocked mitochondrial transfer. Our findings indicate a higher mitochondrial transfer capacity of iPSC-MSCs than BM-MSCs to rescue CS-induced mitochondrial damage. iPSC-MSCs may thus hold promise for the development of cell therapy in COPD.