Nicotine modulates multiple inflammatory responses in the lung through the nicotinic acetylcholine receptor subtype alpha7 (α7). Previously we reported that α7 modulates both the hematopoietic and epithelium responses in the lung to the bacterial inflammogen, lipopolysaccharide (LPS). Here we apply immunohistochemistry, flow cytometry and RNA-Seq analysis of isolated distal lung epithelium to further define α7-expression and function in this tissue. Mouse lines were used that co-express a bicistronic tau-green fluorescent protein (tGFP) as a reporter of α7 (α7^G) expression and that harbor an α7 with a specific point mutation (α7^E260A:G) that selectively uncouples it from cell calcium-signaling mechanisms. The tGFP reporter reveals strong cell-specific α7-expression by alveolar macrophages (AM), Club cells and ATII cells. Ciliated cells do not express detectible tGFP, but their numbers decrease by one-third in the α7^E260A:G lung compared to controls. Transcriptional comparisons (RNA-Seq) between α7^G and α7^E260A:G enriched lung epithelium 24 hours after challenge with either intra-nasal (i.n.) saline or LPS reveals a robust α7-genotype impact on both the stasis and inflammatory response of this tissue. Overall the α7^E260A:G lung epithelium exhibits reduced inflammatory cytokine/chemokine expression to i.n. LPS. Transcripts specific to Club cells (e.g., CC10, secretoglobins and Muc5b) or to ATII cells (e.g., surfactant proteins) were constitutively decreased in in the α7^E260A:G lung, but they were strongly induced in response to i.n. LPS. Protein analysis applying immunohistochemistry and ELISA also revealed α7-associated differences suggested by RNA-Seq including altered mucin protein 5b (Muc5b) accumulation in the α7^E260A:G bronchia, that in some cases appeared to form airway plugs, and a substantial increase in extracellular matrix deposits around α7^E260A:G airway bronchia linings that was not seen in controls. Our results show that α7 is an important modulator of normal gene expression stasis and the response to an inhaled inflammogen in the distal lung epithelium. Further, when normal α7 signaling is disrupted, changes in lung gene expression resemble those associated with long-term lung pathologies seen in humans who use inhaled nicotine products.