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Type 2 alveolar epithelial cells (AEC2s) are stem cells in the adult lung that contribute to lower airway repair. Agents that promote the selective expansion of these cells might stimulate regeneration of the compromised alveolar epithelium, an etiology-defining event in several pulmonary diseases. From a high-content imaging screen of the drug repurposing library ReFRAME, we identified that dipeptidyl peptidase 4 (DPP4) inhibitors, widely used type 2 diabetes medications, selectively expand AEC2s and are broadly efficacious in several mouse models of lung damage. Mechanism of action studies revealed that the protease DPP4, in addition to processing incretin hormones, degrades IGF-1 and IL-6, essential regulators of AEC2 expansion whose levels are increased in the luminal compartment of the lung in response to drug treatment. To selectively target DPP4 in the lung with sufficient drug exposure, we developed NZ-97, a locally delivered, lung persistent DPP4 inhibitor that broadly promotes efficacy in mouse lung damage models with minimal peripheral exposure and good tolerability. This work reveals DPP4 as a central regulator of AEC2 expansion and affords a promising therapeutic approach to broadly stimulate regenerative repair in pulmonary disease.