The adult lung is continuously exposed to environmental insults such as pathogens, pollutants and toxins, necessitating robust regenerative mechanisms to maintain tissue integrity and function. Epithelial regeneration relies on the activity and plasticity of resident stem and progenitor cell populations that are spatially distributed across airway and alveolar compartments. Basal cells in the conducting airways and alveolar type (AT) 2 cells in the alveoli act as regional stem cells, capable of self-renewal and multilineage differentiation. Additionally, variant club cells, bronchioalveolar stem cells (BASCs) and newly identified secretory and transitional cell types such as respiratory airway secretory and AT0 cells have emerged as critical players in lung repair. Cellular plasticity, the ability of differentiated cells to dedifferentiate or transdifferentiate, enables rapid adaptation to injury but may also contribute to chronic lung disease when dysregulated. Ageing and chronic injury reduce regenerative capacities, leading to failed repair, fibrotic remodelling or epithelial simplification, as seen in diseases such as idiopathic pulmonary fibrosis and COPD. Recent advances in single-cell and spatial transcriptomics have revealed cellular heterogeneity, novel progenitor states and transitional intermediates that underpin both normal repair and disease pathogenesis. In this review, we integrate findings from animal models and human lung studies to highlight conserved and divergent mechanisms governing cell fate decisions. We discuss how niche signals, transcriptional programmes and extrinsic cues shape epithelial regeneration and explore the therapeutic implications of targeting epithelial plasticity in chronic lung disease.