Alveolar epithelial type 2 cell (AEC2) dysfunction is implicated in the pathogenesis of adult and pediatric interstitial lung disease (ILD), including idiopathic pulmonary fibrosis (IPF); however, identification of disease-initiating mechanisms has been impeded by inability to access primary AEC2s early on. Here, we present a human in vitro model permitting investigation of epithelial-intrinsic events culminating in AEC2 dysfunction, using patient-specific induced pluripotent stem cells (iPSCs) carrying an AEC2-exclusive disease-associated variant (SFTP