Although lung disease is a major cause of mortality, the mechanisms involved in human lung regeneration are unclear because of the lack of experimental models. Here we report a novel model where human pluripotent stem cell-derived expandable cell lines sharing features of airway secretory and basal cells engraft in the distal rat lung after conditioning by locoregional de-epithelialization followed by irradiation and immunosuppression. The engrafting cells, which we named distal lung epithelial progenitors (DLEPs), contributed to alveolar epithelial cells and generated 'KRT5-pods', structures involved in distal lung repair after severe injury, but only rarely to distal airways. Most strikingly, however, injury induced by the conditioning regimen was largely prevented by the engrafting DLEPs. The approach described here provides a model to study mechanisms involved in human lung regeneration, and potentially lays the foundation for the preclinical development of cell therapy to treat lung injury and disease.