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Alveolar epithelium in lungs provides essential functions for gas exchange through blood-air barrier and preserving the structural integrity of alveoli. Recently, we derived Expandable Lung Epithelial Progenitors (ELEP) from hESCs, and demonstrated their capacity to differentiate to various mature airway and alveolar epithelial cell types. ELEPs represent a novel, engineered cell population and a versatile experimental platform for investigating alveolar regeneration, as well as the cellular response to harmful stimuli.