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Recent studies have implicated keratin 5 (KRT5)+ cells in repopulation of damaged lung tissue following severe H1N1 influenza virus infection. However, the origins of the cells repopulating the injured alveolar region remain controversial. We sought to determine the cellular dynamics of lung repair following influenza infection and define whether nascent KRT5+ cells repopulating alveolar epithelium were derived from pre-existing alveolar or airway progenitor cells. We found that the wound-healing response begins with proliferation of SOX2+ SCGB1A1− KRT5− progenitor cells in airways. These cells generate nascent KRT5+ cells as an early response to airway injury and yield progeny that colonize damaged alveolar parenchyma. Moreover, we show that local alveolar progenitors do not contribute to nascent KRT5+ cells after injury. Repopulation of injured airway and alveolar regions leads to proximalization of distal airways by pseudostratified epithelium and of alveoli by airway-derived epithelial cells that lack the normal characteristics of mature airway or alveolar epithelium.