During the acute respiratory distress syndrome, epithelial cells, primarily alveolar type (AT) I cells, die and slough off, resulting in enhanced permeability. ATII cells proliferate and spread onto the denuded basement membrane to reseal the barrier. Repair of the alveolar epithelium is critical for clinical recovery; however, mechanisms underlying ATII cell proliferation and spreading are not well understood. We hypothesized that hypoxia-inducible factor (HIF)1α promotes proliferation and spreading of ATII cells during repair after lung injury. Mice were treated with lipopolysaccharide or hydrochloric acid. HIF activation in ATII cells after injury was demonstrated by increased luciferase activity in oxygen degradation domain–Luc (HIF reporter) mice and expression of the HIF1α target gene GLUT1. ATII cell proliferation during repair was attenuated in ATII cell–specific HIF1α knockout (SftpcCreERT2^+/−;HIF1α^f/f) mice. The HIF target vascular endothelial growth factor promoted ATII cell proliferation in vitro and after lung injury in vivo. In the scratch wound assay of cell spreading, HIF stabilization accelerated, whereas HIF1α shRNA delayed wound closure. SDF1 and its receptor, CXCR4, were found to be HIF1α-regulated genes in ATII cells and were up-regulated during lung injury. Stromal cell-derived factor 1/CXCR4 inhibition impaired cell spreading and delayed the resolution of permeability after lung injury. We conclude that HIF1α is activated in ATII cells after lung injury and promotes proliferation and spreading during repair.