Repair of injured lungs represents a longstanding therapeutic challenge. We show that human and mouse embryonic lung tissue from the canalicular stage of development (20-22 weeks of gestation for humans, and embryonic day 15-16 (E15-E16) for mouse) are enriched with progenitors residing in distinct niches. On the basis of the marked analogy to progenitor niches in bone marrow (BM), we attempted strategies similar to BM transplantation, employing sublethal radiation to vacate lung progenitor niches and to reduce stem cell competition. Intravenous infusion of a single cell suspension of canalicular lung tissue from GFP-marked mice or human fetal donors into naphthalene-injured and irradiated syngeneic or SCID mice, respectively, induced marked long-term lung chimerism. Donor type structures or 'patches' contained epithelial, mesenchymal and endothelial cells. Transplantation of differentially labeled E16 mouse lung cells indicated that these patches were probably of clonal origin from the donor. Recipients of the single cell suspension transplant exhibited marked improvement in lung compliance and tissue damping reflecting the energy dissipation in the lung tissues. Our study provides proof of concept for lung reconstitution by canalicular-stage human lung cells after preconditioning of the pulmonary niche.