Lung cancer and chronic lung diseases impose major disease burdens worldwide and are caused by inhaled noxious agents including tobacco smoke. The cellular origins of environmental-induced lung tumors and of the dysfunctional airway and alveolar epithelial turnover observed with chronic lung diseases are unknown. To address this, we combined mouse models of genetic labeling and ablation of airway (club) and alveolar cells with exposure to environmental noxious and carcinogenic agents. Club cells are shown to survive KRAS mutations and to form lung tumors after tobacco carcinogen exposure. Increasing numbers of club cells are found in the alveoli with aging and after lung injury, but go undetected since they express alveolar proteins. Ablation of club cells prevents chemical lung tumors and causes alveolar destruction in adult mice. Hence club cells are important in alveolar maintenance and carcinogenesis and may be a therapeutic target against premalignancy and chronic lung disease.