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Abstract Background Functional alveolar regeneration is essential for the restoration of normal lung homeostasis after acute lung injury (ALI) and acute respiratory distress syndrome (ARDS). Lung is a relatively quiescent organ and a variety of stem cells are recruited to participate in lung repair and regeneration after lung tissue injury. However, there is still no effective method for promoting the proliferation of endogenous lung stem cells to promote repair and regeneration. Methods Using protein mass spectrometry analysis, we analyzed the microenvironment after acute lung injury. RNA sequencing and image cytometry were used in the alveolar epithelial type 2 cells (AEC2s) subgroup identification. Then we used Sftpc+AEC2 lineage tracking mice and purified AEC2s to further elucidate the molecular mechanism by which CTGF regulates AEC2s proliferation both in vitro and in vivo. Bronchoalveolar lavage fluid (BALF) from thirty ARDS patients who underwent bronchoalveolar lavage was collected for the analysis of the correlation between the expressing of Krt5 in BALF and patients’ prognosis. Results Here, we elucidate that AEC2s are the main facultative stem cells of the distal lung after ALI and ARDS. The increase of connective tissue growth factor (CTGF) in the microenvironment after ALI promoted the proliferation of AEC2s subpopulations. Proliferated AEC2s rapidly expanded and differentiated into alveolar epithelial type 1 cells (AEC1s) in the regeneration after ALI. CTGF initiates the phosphorylation of LRP6 by promoting the interaction between Krt5 and LRP6 of AEC2s, thus activating the Wnt signaling pathway, which is the molecular mechanism of CTGF promoting the proliferation of AEC2s subpopulation. Conclusions Our study verifies that CTGF promotes the repair and regeneration of alveoli after acute lung injury by promoting the proliferation of AEC2s subpopulation.