Rationale: Little is known about the contribution of bone marrow–derived progenitor cells (BMPCs) in the regulation endothelial barrier function as defined by microvascular permeability alterations at the level of adherens junctions (AJs). Objective: We investigated the role of BMPCs in annealing AJs and thereby in preventing lung edema formation induced by endotoxin (LPS). Methods and Results: We observed that BMPCs enhanced basal endothelial barrier function and prevented the increase in pulmonary microvascular permeability and edema formation in mice after LPS challenge. Coculture of BMPCs with endothelial cells induced Rac1 and Cdc42 activation and AJ assembly in endothelial cells. However, transplantation of BMPCs isolated from sphingosine kinase-1–null mice ( SPHK1 −/− ), having impaired S1P production, failed to activate Rac1 and Cdc42 or protect the endothelial barrier. Conclusions: These results demonstrate that BMPCs have the ability to reanneal endothelial AJs by paracrine S1P release in the inflammatory milieu and the consequent activation of Rac-1 and Cdc42 in endothelial cells.