Organ regeneration in mammals is hypothesized to require a functional pool of stem or progenitor cells, but the role of these cells in lung regeneration is unknown. Whereas postnatal regeneration of alveolar tissue has been attributed to type II alveolar epithelial cells (AECII), we reasoned that bronchioalveolar stem cells (BASCs) have the potential to contribute substantially to this process. To test this hypothesis, unilateral pneumonectomy (PNX) was performed on adult female C57/BL6 mice to stimulate compensatory lung regrowth. The density of BASCs and AECII, and morphometric and physiological measurements, were recorded on days 1, 3, 7, 14, 28, and 45 after surgery. Vital capacity was restored by day 7 after PNX. BASC numbers increased by day 3, peaked to 220% of controls (P < 0.05) by day 14, and then returned to baseline after active lung regrowth was complete, whereas AECII cell densities increased to 124% of baseline (N/S). Proliferation studies revealed significant BrdU uptake in BASCs and AECII within the first 7 days after PNX. Quantitative analysis using a systems biology model was used to evaluate the potential contribution of BASCs and AECII. The model demonstrated that BASC proliferation and differentiation contributes between 0 and 25% of compensatory alveolar epithelial (type I and II cell) regrowth, demonstrating that regeneration requires a substantial contribution from AECII. The observed cell kinetic profiles can be reconciled using a dual-compartment (BASC and AECII) proliferation model assuming a linear hierarchy of BASCs, AECII, and AECI cells to achieve lung regrowth.