ABSTRACT Human induced pluripotent stem cells (iPSCs) can be used to generate 3-dimensional lung organoid structures. However, most lung organoid studies have focused on human iPSC-derived lung epithelial subtypes. They have not to date included human iPSC-derived endothelial cells and systematically addressed the critical role of lung vascular endothelial cells and vascular perfusion itself in the generation and maturation of lung organoids which model human lung structures. The alveolar units consist of two predominant cell types – epithelial cells (EpiC)(40-45% of total cells) and endothelial cells (EC) (45-50% of total cells). Our key Supporting Data support the critical and heretofore underestimated role of human lung vascular endothelial cells in guiding differentiation of human lung epithelial progenitor cells and formation of vascularized human lung organoid. We propose to use this novel platform generated by integration of hiPSC-derived epithelial and endothelial cells to address the following aims: Aim 1 tests the hypothesis that endothelial cell-derived angiocrine signals in lung organoids activate Wnt signaling and mediate the maturation of lung alveolar units and the corollary hypothesis that reciprocal epicrine signaling of EpiC regulates lung EC fate, generation of recently described specific lung EC populations and lung microvessel patterning at the level of alveoli. Aim 2 will test the hypothesis that the vascularized and perfused human lung organoid serves as a translationally relevant reductionist model for teasing apart the elusive signaling and molecular mechanisms of inflammatory injury at the level of the alveolar unit and resolution of injury. Aim 3 will test the hypothesis that lung EC signaling through the upregulation of ACE2 in alveolar Type II epithelial cells promotes SARS-CoV-2 entry and infection of lungs. Together the proposed studies through their focus on lung EC and vascularization of human lung organoid and incorporation of alveolar epithelial cells in this system will uncover fundamental mechanisms of how the vascularized alveolar unit functions in health to maintain homeostasis and how defective cross-talk between EC and alveolar epithelial cells contributes to inflammatory lung disease.