Airway stem cells have been implicated in the pathology and progression of chronic airway diseases and yet also hold the promise of physiological and ultimately therapeutic repair of damage wrought by these conditions. The present invention is based on the observation that certain p63-expressing stem cells in the bronchiolar epithelium undergo rapid proliferation after infection and radiate to interbronchiolar regions of alveolar ablation. Once there, these cells assemble into discrete, Krt5+ pods and initiate expression of markers typical of alveoli. The dynamics of this p63-expressing stem cell in lung regeneration mirrors parallel findings that defined pedigrees of human distal airway stem cells assemble alveoli-like structures in vitro and provides new therapeutic avenues to acute and chronic airway disease as well as identifying agents which can promote repair.