Local lung hypoxia determines epithelial fate decisions during alveolar regeneration

After influenza infection, lineage-negative epithelial progenitors (LNEPs) exhibit a binary response to reconstitute epithelial barriers: activating a Notch-dependent ΔNp63/cytokeratin 5 (Krt5) remodelling program or differentiating into alveolar type II cells (AEC2s). Here we show that local lung hypoxia, through hypoxia-inducible factor (HIF1α), drives Notch signalling and Krt5 pos basal-like cell expansion. Single-cell transcriptional profiling of human AEC2s from fibrotic lungs revealed a hypoxic subpopulation with activated Notch, suppressed surfactant protein C (SPC), and transdifferentiation toward a Krt5 pos basal-like state. Activated murine Krt5 pos LNEPs and diseased human AEC2s upregulate strikingly similar core pathways underlying migration and squamous metaplasia. While robust, HIF1α-driven metaplasia is ultimately inferior to AEC2 reconstitution in restoring normal lung function. HIF1α deletion or enhanced Wnt/β-catenin activity in Sox2 pos LNEPs blocks Notch and Krt5 activation, instead promoting rapid AEC2 differentiation and migration and improving the quality of alveolar repair. Xi et al. show that after influenza infection, hypoxia drives Notch signalling to expand Krt5 + basal-like cells in the lung. On HIF1α loss, epithelial progenitors directly differentiate into alveolar type II cells and promote functional regeneration.