Chronic lung diseases are debilitating illnesses ranking among the top causes of death globally. Currently, clinically available therapeutic options capable of curing chronic lung diseases are limited to lung transplantation, which is hindered by donor organ shortage. This highlights the urgent need for alternative strategies to repair damaged lung tissues. Stem cell transplantation has emerged as a promising avenue for regenerative treatment of the lung, which involves delivery of healthy lung epithelial progenitor cells that subsequently engraft in the injured tissue and further differentiate to reconstitute the functional respiratory epithelium. These transplanted progenitor cells possess the remarkable ability to self-renew, thereby offering the potential for sustained long-term treatment effects. Notably, the transplantation of basal cells, the airway stem cells, holds the promise for rehabilitating airway injuries resulting from environmental factors or genetic conditions such as cystic fibrosis. Similarly, for diseases affecting the alveoli, alveolar type II cells have garnered interest as a viable alveolar stem cell source for restoring the lung parenchyma from genetic or environmentally induced dysfunctions. Expanding upon these advancements, the use of induced pluripotent stem cells to derive lung progenitor cells for transplantation offers advantages such as scalability and patient specificity. In this review, we comprehensively explore the progress made in lung stem cell transplantation, providing insights into the current state of the field and its future prospects.