Injury models have suggested that the lung contains anatomically and functionally distinct epithelial stem cell populations. We have isolated such a regional pulmonary stem cell population, termed bronchioalveolar stem cells (BASCs). Identified at the bronchioalveolar duct junction, BASCs were resistant to bronchiolar and alveolar damage and proliferated during epithelial cell renewal in vivo. BASCs exhibited self-renewal and were multipotent in clonal assays, highlighting their stem cell properties. Furthermore, BASCs expanded in response to oncogenic K-ras in culture and in precursors of lung tumors in vivo. These data support the hypothesis that BASCs are a stem cell population that maintains the bronchiolar Clara cells and alveolar cells of the distal lung and that their transformed counterparts give rise to adenocarcinoma. Although bronchiolar cells and alveolar cells are proposed to be the precursor cells of adenocarcinoma, this work points to BASCs as the putative cells of origin for this subtype of lung cancer.