Unlike many mammalian vital organs, the lung exhibits a robust, multifaceted regenerative response to severe injuries such as influenza infection, which primarily targets epithelial cells in the airways and alveoli. Quiescent lung-resident epithelial progenitors proliferate, migrate, and differentiate following lung injury, participating in two distinct reparative pathways: functionally beneficial regeneration and dysplastic tissue remodeling. Intrapulmonary airway-resident basal-like p63+ progenitors are one such progenitor cell type that migrates from the airways to form ectopic bronchiolar tissue in the alveoli, generating honeycomb-like cysts that fail to resolve after injury. Though this phenomenon is now well described, the cell-autonomous signals that drive dysplastic alveolar remodeling remain uncertain, a question made especially salient by observations that p63+ progenitors also expand dramatically upon diffuse alveolar damage in humans resulting from a variety of insults including SARS-CoV-2-induced ARDS. Here we show that the master basal cell transcription factor ΔNp63 is required for the immense migratory capacity of intrapulmonary p63+ progenitors and consequently for the dysplastic repair pathway manifest by these cells. We further demonstrate that ΔNp63 restricts the fate plasticity of intrapulmonary p63+ progenitors by regulating their epigenetic landscape, and that loss of ΔNp63 alters the deposition of active and repressive histone modifications at key differentiation gene loci, allowing ΔNp63KO progenitors to proceed towards airway or alveolar differentiation depending on their surrounding environment. These insights into the regulatory mechanisms of dysplastic repair and intrapulmonary p63+ progenitor fate choice highlight potential therapeutic targets to promote more effective alveolar regeneration following severe lung injuries.