Understanding the molecular and cellular processes involved in lung epithelial regeneration may fuel the development of therapeutic approaches for lung diseases. We combine mouse models allowing diphtheria toxin-mediated damage of specific epithelial cell types and parallel GFP-labeling of functionally dividing cells with single-cell transcriptomics to characterize the regeneration of the distal lung. We uncover cell types, including Krt13⁺ basal and Krt15⁺ club cells, detect an intermediate cell state between basal and goblet cells, reveal goblet cells as actively dividing progenitor cells, and provide evidence that adventitial fibroblasts act as supporting cells in epithelial regeneration. We also show that diphtheria toxin-expressing cells can persist in the lung, express specific inflammatory factors, and transcriptionally resemble a previously undescribed population in the lungs of COVID-19 patients. Our study provides a comprehensive single-cell atlas of the distal lung that characterizes early transcriptional and cellular responses to concise epithelial injury, encompassing proliferation, differentiation, and cell-to-cell interactions.