Since the lung is repeatedly subjected to injury by pathogens and toxicants, maintenance of pulmonary homeostasis requires rapid repair of its epithelial surfaces. Ciliated bronchiolar epithelial cells, previously considered as terminally differentiated, underwent squamous cell metaplasia within hours after bronchiolar injury with naphthalene. Expression of transcription factors active in morphogenesis and differentiation of the embryonic lung, including beta-catenin, Foxa2, Foxj1, and Sox family members (Sox17 and Sox2), was dynamically regulated during repair and redifferentiation of the bronchiolar epithelium after naphthalene injury. Squamous cells derived from ciliated cells spread beneath injured Clara cells within 6-12 h after injury, maintaining the integrity of the epithelium. Dynamic changes in cell shape and gene expression, indicating cell plasticity, accompanied the transition from squamous to cuboidal to columnar cell types as differentiation-specific cell markers typical of the mature airway were restored. Similar dynamic changes in the expression of these transcription factors occurred in ciliated and Clara cells during regeneration of the lung after unilateral pneumonectomy. Taken together, these findings demonstrate that ciliated epithelial cells spread and transdifferentiate into distinct epithelial cell types to repair the airway epithelium.