The composition of the conducting airway epithelium varies significantly along the proximal to distal axis, with that of the tracheal epithelium exhibiting the greatest complexity. A number of progenitor cells have been proposed to contribute to the maintenance of this cellular diversity both in the steady state and in response to injury. However, individual roles for each progenitor cell type are poorly defined in vivo. The present study was undertaken to investigate the hypothesis that basal cells represent a multipotent progenitor cell type for renewal of the injured tracheal epithelium. To understand their contribution to epithelial repair, mice were exposed to naphthalene to induce airway injury and depletion of the secretory cell progenitor pool. Injury resulted in a rapid induction of cytokeratin 14 (K14) expression among the majority of GSI-B₄-reactive cells and associated hyperplasia of basal cells. Restoration of depleted secretory cells occurred after 6 days of recovery and was associated with regression of the basal cell hyperplasia, suggesting a progenitor-progeny relationship. Multipotent differentiation of basal cells was confirmed using a bitransgenic ligand-regulated Cre-loxP reporter approach in which expression of a ubiquitously expressed LacZ reporter was activated within K14-expressing progenitor cells during airway repair. With the use of this approach, it was determined that K14-expressing cells include subsets capable of either multipotent or unipotent differentiation in vivo. We conclude that basal cells have the capacity for restoration of a fully differentiated epithelium.