Human CD34(+) stem cells differentiated into type-II pneumocytes in Dulbecco's modified Eagle medium (DMEM) having hydrocortisone, insulin, fibroblast growth factor (FGF), epidermal growth factor (EGF) and bovine serum albumin (BSA), expressing surfactant proteins-B (SP-B) and C (SP-C), alkaline phosphatase (ALP) and lysozyme.