Chronic lung diseases present tremendous health burdens and share a common pathobiology of dysfunctional epithelial repair. Lung adenocarcinoma, the leading cancer killer worldwide, is caused mainly by chemical carcinogens of tobacco smoke that induce mutations in pulmonary epithelial cells leading to uncontrolled epithelial proliferation. Lung epithelial cells that possess the capacity for self-renewal and regeneration of other lung cell types are believed to underlie the pathobiology of chronic obstructive, fibrotic and neoplastic lung disorders. However, the understanding of lung epithelial progenitor cell hierarchy and turnover is incomplete and a comprehensive model of the cellular and transcriptional events that underlie lung regeneration and carcinogenesis is missing. The mapping of these processes is extremely important, since their modulation would potentially allow effective cure and/or prevention of chronic lung diseases. In this review we describe current knowledge on cellular and molecular pathways at play during lung repair and carcinogenesis and summarise the critical lung cell populations with regenerative and cancerous potential.