Understanding the pathways that control epithelial carcinogenesis is vital to the development of effective treatments. The Polycomb group family member Bmi1 is overexpressed in numerous epithelial tumors, but its role in their development has not been established. We now show a key role for Bmi1 in lung adenocarcinoma. Whereas lung development occurs normally in Bmi1-deficient mice, loss of Bmi1 decreases the number and progression of lung tumors at a very early point in an oncogenic K-ras-initiated mouse model of lung cancer. This correlates with a defect in the ability of Bmi1-deficient putative bronchiolalveolar stem cells (BASCs) to proliferate in response to the oncogenic stimulus. Notably, in the absence of oncogenic K-ras, Bmi1-deficient BASCs show impaired proliferation and self-renewal capacity in culture and after lung injury in vivo. Abrogated lung cancer development and BASC self-renewal occur partially in a p19^ARF-dependent manner. Our data suggest that Bmi1 deficiency suppresses tumor development by limiting the expansion potential of BASCs, the apparent lung cancer cells of origin. Because Bmi1 is elevated in additional tumor types, this suggests that Bmi1 plays a key role in regulating proliferation of both stem cells and tumor cells in diverse adult epithelial tissues.