Environmental exposures increase the risk for severe lung disease, but specific drivers of persistent epithelial injury and immune dysfunction remain unclear. Here, we identify a feedback circuit triggered by chitin, a common component of airborne particles, that affects lung health after epithelial injury. In mice, epithelial damage disrupts lung chitinase activity, leading to environmental chitin accumulation, impaired epithelial renewal, and group 2 innate lymphoid cell (ILC2) activation. ILC2s, in turn, restore homeostasis by inducing acidic mammalian chitinase (AMCase) in regenerating epithelial cells and promoting chitin degradation, epithelial differentiation, and inflammatory resolution. Mice lacking AMCase or ILC2s fail to clear chitin and exhibit increased mortality and impaired epithelial regeneration after injury. These effects are ameliorated by chitinase replacement therapy, demonstrating that chitin degradation is crucial for recovery after various forms of lung perturbation. Thus, the ILC2-chitinase response circuit may serve as a target for alleviating persistent postinjury lung epithelial and immune dysfunction.