The collection and use of stem cells from the fetal membranes as cell therapy for a variety of lung diseases, including preterm lung disease, have been previously proposed. To date, only cells from term amnion have been assessed. In the setting of a future therapy for the preterm neonate, it would be ideal if autologous cells could be given. However, the reparative and anti-inflammatory actions of stem cells isolated from preterm amnions have not been evaluated. In this study, with a view to developing an autologous cell therapy for preterm lung injury, we compared the differentiation potential and efficacy of term versus preterm human amnion epithelial cells (hAECs) to protect against inflammation and fibrosis in a bleomycin mouse model of lung injury. We found that, unlike term hAECs, preterm hAECs did not differentiate into a lung lineage following culture in small airway growth media. Preterm hAECs also exerted significantly less protective effects than term hAEC following acute lung injury. Specifically, preterm hAEC did not improve Ashcroft scoring or collagen deposition in the lung despite a reduction in activated myofibroblasts. Term hAECs expressed double the levels of HLA-G compared to preterm hAECs. These findings indicate that while hAECs can be isolated from term and preterm amnions in similar numbers, they bear distinctive characteristics, which may impact upon their clinical use.