Idiopathic pulmonary fibrosis (IPF) consists of fibrotic alveolar remodeling and progressive loss of pulmonary function. Genetic and experimental evidence indicates that chronic alveolar injury and failure to properly repair the respiratory epithelium are intrinsic to IPF pathogenesis. Loss of alveolar type 2 (AT2) stem cells or mutations that either impair their self-renewal and/or impair their differentiation into AT1 cells can serve as a trigger of pulmonary fibrosis. Recent reports indicate increased YAP activity in respiratory epithelial cells in IPF lungs. Individual IPF epithelial cells with aberrant YAP activation in bronchiolized regions frequently co-express AT1, AT2, conducting airway selective markers and even mesenchymal or EMT markers, demonstrating ‘indeterminate’ states of differentiation and suggesting that aberrant YAP signaling might promote pulmonary fibrosis. Yet, Yap and Taz have recently also been shown to be important for AT1 cell maintenance and alveolar epithelial regeneration afterStreptococcus pneumoniae-induced injury. To investigate how epithelial Yap/Taz might promote pulmonary fibrosis or drive alveolar epithelial regeneration, we inactivated the Hippo pathway in AT2 stem cells resulting in increased nuclear Yap/Taz, and found that this promotes their alveolar regenerative capacity and reduces pulmonary fibrosis following bleomycin injury by pushing them along the AT1 cell lineage. Vice versa, inactivation of bothYap1andWwtr1(encoding Taz) orWwtr1alone in AT2 cell stem cells impaired alveolar epithelial regeneration and resulted in increased pulmonary fibrosis upon bleomycin injury. Interestingly, the inactivation of onlyYap1in AT2 stem cells promoted alveolar epithelial regeneration and reduced pulmonary fibrosis. Together, these data suggest that epithelial Yap promotes, and epithelial Taz reduces pulmonary fibrosis suggesting that targeting Yap but not Taz-mediated transcription might help promote AT1 cell regeneration and treat pulmonary fibrosis.