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Repair-supportive mesenchymal cells (RSMCs) have been recently reported in the context of naphthalene (NA)-induced airway injury and regeneration. These cells transiently express smooth muscle actin (Acta2) and are enriched with platelet-derived growth factor receptor alpha (Pdgfra) and fibroblast growth factor 10 (Fgf10) expression. Genetic deletion of Ctnnb1 (gene coding for beta catenin) or Fgf10 in these cells using the Acta2-Cre-ERT2 driver line after injury (defined as NA-Tam condition; Tam refers to tamoxifen) led to impaired repair of the airway epithelium. In this study, we demonstrate that RSMCs are mostly captured using the Acta2-Cre-ERT2 driver when labeling occurs after (NA-Tam condition) rather than before injury (Tam-NA condition), and that their expansion occurs mostly between days 3 and 7 following NA treatment. Previous studies have shown that lineage-traced peribronchial GLI1+ cells are transiently amplified after NA injury. Here, we report that Gli1 expression is enriched in RSMCs. Using lineage tracing with Gli1Cre−ERT2 mice combined with genetic inactivation of Fgf10, we show that GLI1+ cells with Fgf10 deletion fail to amplify around the injured airways, thus resulting in impaired airway epithelial repair. Interestingly, Fgf10 expression is not upregulated in GLI1+ cells following NA treatment, suggesting that epithelial repair is mostly due to the increased number of Fgf10-expressing GLI1+ cells. Co-culture of SCGB1A1+ cells with GLI1+ cells isolated from non-injured or injured lungs showed that GLI1+ cells from these two conditions are similarly capable of supporting bronchiolar organoid (or bronchiolosphere) formation. Single-cell RNA sequencing on sorted lineage-labeled cells showed that the RSMC signature resembles that of alveolar fibroblasts. Altogether, our study provides strong evidence for the involvement of mesenchymal progenitors in airway epithelial regeneration and highlights the critical role played by Fgf10-expressing GLI1+ cells in this context. [ABSTRACT FROM AUTHOR]