An aberrant oxygen environment at birth increases the severity of respiratory viral infections later in life through poorly understood mechanisms. Here, we show that alveolar epithelial cell (AEC) 2 cells (AEC2s), progenitors for AEC1 cells, are depleted in adult mice exposed to neonatal hypoxia or hyperoxia. Airway cells expressing surfactant protein (SP)-C and ATP binding cassette subfamily A member 3, alveolar pod cells expressing keratin (KRT) 5, and pulmonary fibrosis were observed when these mice were infected with a sublethal dose of HKx31, H3N2 influenza A virus. This was not seen in infected siblings birthed into room air. Genetic lineage tracing studies in mice exposed to neonatal hypoxia or hyperoxia revealed pre-existing secretoglobin 1a1⁺ cells produced airway cells expressing SP-C and ATP binding cassette subfamily A member 3. Pre-existing Kr5⁺ progenitor cells produced squamous alveolar cells expressing receptor for advanced glycation endproducts, aquaporin 5, and T1α in alveoli devoid of AEC2s. They were not the source of KRT5⁺ alveolar pod cells. These oxygen-dependent changes in epithelial cell regeneration and fibrosis could be recapitulated by conditionally depleting AEC2s in mice using diphtheria A toxin and then infecting with influenza A virus. Likewise, airway cells expressing SP-C and alveolar cells expressing KRT5 were observed in human idiopathic pulmonary fibrosis. These findings suggest that alternative progenitor lineages are mobilized to regenerate the alveolar epithelium when AEC2s are severely injured or depleted by previous insults, such as an adverse oxygen environment at birth. Because these lineages regenerate AECs in spatially distinct compartments of a lung undergoing fibrosis, they may not be sufficient to prevent disease.