Premature birth disrupts normal lung development and places infants at risk for bronchopulmonary dysplasia (BPD), a disease increasing in incidence which disrupts lung health throughout the lifespan. The TGFβ superfamily has been implicated in BPD pathogenesis, however, what cell lineage it impacts remains unclear. We show that Tgfbr2 is critical for AT1 cell fate maintenance and function. Loss of Tgfbr2 in AT1 cells during late lung development leads to AT1-AT2 cell reprogramming and altered pulmonary architecture, which persists into adulthood. Restriction of fetal lung stretch and associated AT1 cell spreading through a model of oligohydramnios enhances AT1-AT2 reprogramming. Transcriptomic and proteomic analysis reveal the necessity of Tgfbr2 expression in AT1 cells for extracellular matrix production. Moreover, TGFβ signaling regulates integrin transcription to alter AT1 cell morphology, which further impacts ECM expression through changes in mechanotransduction. These data reveal the cell intrinsic necessity of TGFβ signaling in maintaining AT1 cell fate and reveal this cell lineage as a major orchestrator of the alveolar matrisome.