Cell plasticity, changes in cell fate, is crucial for tissue regeneration. In the lung, failure of regeneration leads to diseases, including fibrosis. However, the mechanisms governing alveolar cell plasticity during lung repair remain elusive. We previously showed that PCLAF remodels the DREAM complex, shifting the balance from cell quiescence towards cell proliferation. Here, we find that PCLAF expression is specific to proliferating lung progenitor cells, along with the DREAM target genes transactivated by lung injury. Genetic ablation of Pclaf impairs AT1 cell repopulation from AT2 cells, leading to lung fibrosis. Mechanistically, the PCLAF-DREAM complex transactivates CLIC4, triggering TGF-β signaling activation, which promotes AT1 cell generation from AT2 cells. Furthermore, phenelzine that mimics the PCLAF-DREAM transcriptional signature increases AT2 cell plasticity, preventing lung fibrosis in organoids and mice. Our study reveals the unexpected role of the PCLAF-DREAM axis in promoting alveolar cell plasticity, beyond cell proliferation control, proposing a potential therapeutic avenue for lung fibrosis prevention.