We demonstrate that natural killer (NK) cells induce higher cytotoxicity against lung cancer stem-like cells (hA549) compared to differentiated lung cancer cell lines (H292). The supernatants from split anergized NK cells (NK cells treated with IL- and anti-CD16 mAbs) induced differentiation in hA549. Differentiated lung cancer cell lines (H292) and NK cell differentiated hA549 expressed reduced NK cell-mediated cytotoxicity but expressed higher sensitivity to chemotherapeutic drugs. This finding validated our previous reports demonstrating that the levels of NK cell-mediated cytotoxicity and sensitivity to chemotherapeutic drugs correlate directly and indirectly, respectively, with the stage and levels of tumor differentiation. We also demonstrate the role of IFN-γ and TNF-α in inducing tumor differentiation. NK cells’ supernatants or IFN-γ and TNF-α-induced tumor differentiation was blocked when we used antibodies against IFN-γ and TNF-α. Therefore, IFN-γ and TNF-α secreted from NK cells play a crucial role in tumor differentiation resulting in increased susceptibility in tumors to chemo-therapeutic drugs. We also observed different effects of MHC-class I antibodies in CSCs vs. differentiated tumors. Treatment with anti-MHC-class I decreased NK cell-mediated cytotoxicity in hA549 whereas, the increased NK cell-mediated cytotoxicity was seen when differentiated tumors were treated with antibodies against MHC-class I.