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Lung maturation is not limited to proper structural development but also includes differentiation and functionality of various highly specialized alveolar cell types. Alveolar type 1 (AT1s) cells occupy nearly 95% of the alveolar surface and are critical for establishing efficient gas exchange in the mature lung. AT1 cells arise from progenitors specified during the embryonic stage as well as alveolar epithelial progenitors expressing surfactant protein C (Sftpcpos cells) during postnatal and adult stages. Previously, we found that Wnt5a, a non-canonical Wnt ligand, is required for differentiation of AT1 cells during the saccular phase of lung development. To further investigate the role of Wnt5a in AT1 cell differentiation, we generated and characterized a conditional Wnt5a gain-of-function mouse model. Neonatal Wnt5a gain-of-function disrupted alveologenesis through inhibition of cell proliferation. In this setting Wnt5a downregulated β-catenin-dependent canonical Wnt signaling, repressed AT2 (anti-AT2) and promoted AT1 (pro-AT1) lineage-specific gene expression. In addition, we identified 2 subpopulations of Sftpchigh and Sftpclow alveolar epithelial cells. In Sftpclow cells, Wnt5a exhibits pro-AT1 and anti-AT2 effects, concurrent with inhibition of canonical Wnt signaling. Interestingly, in the Sftpchigh subpopulation, although increasing AT1 lineage-specific gene expression, Wnt5a gain-of-function did not change AT2 gene expression, nor inhibit canonical Wnt signaling. Using primary epithelial cells isolated from human fetal lungs, we demonstrate that this property of Wnt5a is evolutionarily conserved. Wnt5a therefore serves as a selective regulator that ensures proper AT1/AT2 balance in the developing lung., (© The Author(s) 2022. Published by Oxford University Press. All rights reserved. For permissions, please email: journals.permissions@oup.com.)