During alveolar repair, alveolar type 2 (AT2) epithelial cell progenitors rapidly proliferate and differentiate into flat AT1 epithelial cells. Failure of normal alveolar repair mechanisms can lead to loss of alveolar structure (emphysema) or development of fibrosis, depending on the type and severity of injury. To test if β1-containing integrins are required during repair following acute injury, we administered E. coli lipopolysaccharide (LPS) by intratracheal injection to mice with a postdevelopmental deletion of β1 integrin in AT2 cells. While control mice recovered from LPS injury without structural abnormalities, β1-deficient mice had more severe inflammation and developed emphysema. In addition, recovering alveoli were repopulated with an abundance of rounded epithelial cells coexpressing AT2 epithelial, AT1 epithelial, and mixed intermediate cell state markers, with few mature type 1 cells. AT2 cells deficient in β1 showed persistently increased proliferation after injury, which was blocked by inhibiting NF-κB activation in these cells. Lineage tracing experiments revealed that β1-deficient AT2 cells failed to differentiate into mature AT1 epithelial cells. Together, these findings demonstrate that functional alveolar repair after injury with terminal alveolar epithelial differentiation requires β1-containing integrins.