Bone marrow-derived stem cells (BMDCs) have the ability to differentiate into lung epithelial cells in response to damage; however, their role in squamous cell carcinoma (SCC) formation is unknown. This study aimed to determine whether BMDC-derived lung epithelial cells could contribute to SCC formation. A model of lung SCC induced with N-nitrosodiethylamine (NDEA) in recipient female mice transplanted with green fluorescent protein (GFP)-positive BMDCs from male donors was established. Incorporation of BMDCs in lung tissue was determined using immunohistochemistry and immunofluorescence to detect GFP expression and fluorescence in situ hybridization to Y chromosomes. BMDC appeared at three stages of lung SCC progression: metaplasia, dysplasia, and carcinoma. There was a significantly higher proportion of GFP-positive (GFP(+)) cells within SCC than was found in metaplasia and dysplasia 16 weeks post-transplantation (both P < 0.017); GFP(+) BMDCs were also observed in clusters within several SCC nests. Furthermore, most GFP(+) cells in SCC were pancytokeratin-positive (PCK(+)) epithelial cells, and some exhibited proliferative activity as determined by Ki67 staining (9.7 ± 3.92 %). The presence of GFP(+)Ki67(+)PCK(+) cells within SCC nests suggested that some donor BMDCs differentiated into proliferating epithelial cells. Finally, analysis of p63 expression, a marker of SCC cells, indicated that the presence of GFP(+)p63(+) cells (green) in inner parts of the SCC. These findings strongly suggest that BMDC-derived lung epithelial cells could participate in lung SCC formation and partially contribute to tumor growth, which might have significant potential implications for both clinical cancer therapy using BMDCs.