Air spaces of the mammalian lung are lined by a specialized epithelium that is maintained by endogenous progenitor cells. Within bronchioles, the abundance and distribution of progenitor cells that contribute to epithelial homeostasis change as a function of maintenance versus repair. It is unclear whether functionally distinct progenitor pools or a single progenitor cell type maintain the epithelium and how the behavior is regulated in normal or disease states. To address these questions, we applied fractionation methods for the enrichment of distal airway progenitors. We show that bronchiolar progenitor cells can be subdivided into two functionally distinct populations that differ in their susceptibility to injury and contribution to repair. The proliferative capacity of these progenitors is confirmed in a novel in vitro assay. We show that both populations give rise to colonies with a similar dependence on stromal cell interactions and regulation by TGF-β. These findings provide additional insights into mechanisms of epithelial remodeling in the setting of chronic lung disease and offer hope that pharmacologic interventions may be developed to mitigate tissue remodeling.