Lung transplantation, the only definitive treatment for end-stage lung disease, remains hampered by severe complications and a shortage of donor organs. One potential alternative for at least some diseases where the epithelium is specifically affected is stem cell or cellular replacement therapy. Application of this type of therapy is still far away, however. Prerequisites for cellular therapy are an unlimited supply of the correct epithelial progenitors and an efficient engraftment procedure. In this proposal, we focus primarily on the first goal, and use generic injury models to demonstrate the potential of these cells. To address the issue of an unlimited supply of potential airway progenitors, we focused on embryonic stem cells (ESCs) and induced pluripotent stem cells (iPSCs), collectively termed human pluripotent stem cells (hPSCs). We describe here the generation from hPSCs of a population of putative fetal lung distal tip progenitors (pDTPs) that can be expanded continuously (up to now 18 months) and efficiently repopulates most or all lineages in bleomycin-injured lungs of immunodeficient NSG mice. Furthermore, these cells can be converted to cells with all the characteristics of basal cells (BCs), the stem cells of the airway, which, however, showed more limited expansion. Despite the fact the pDTPs engrafted in the airways of bleomycin-treated NSG mice, the derived BC-like cells did not engraft, suggesting that BCs may not possess engraftment capacity or that bleomycin is not an appropriate injury model for these cells. The goal of this proposal is to molecularly characterize both cell populations and evaluate their potentials in a variety of injury models. The specific aims of the proposal are: Aim 1: Molecular and in vitro characterization of pDTPs and BC-like cells Aim 2. In vivo potential of hPSC-derived pDTPs and BC-like cells. Aim 3. Culture conditions and clonality of pDTPs.