Lungs have a complex structure composed of different cell types that form approximately 17 million airway branches of gas-delivering bronchioles connected to 500 million gas-exchanging alveoli. Airways and alveoli are lined by epithelial cells that display a low rate of turnover at steady-state, but can regenerate the epithelium in response to injuries. Here, we review the key points of lung development, homeostasis and epithelial cell plasticity in response to injury and disease, because this knowledge is required to develop new lung disease treatments. Of note, canonical signaling pathways that are essential for proper lung development during embryogenesis are also involved in the pathophysiology of most chronic airway diseases. Moreover, the perfect control of these interconnected pathways is needed for the successful differentiation of induced pluripotent stem cells (iPSC) into lung cells. Indeed, differentiation of iPSC into airway epithelium and alveoli is based on the use of biomimetics of normal embryonic and fetal lung development. In vitro iPSC-based models of lung diseases can help us to better understand the impaired lung repair capacity and to identify new therapeutic targets and new approaches, such as lung cell therapy.