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Abstract Engineered whole lungs may one day expand therapeutic options for patients with end-stage lung disease. However, the feasibility of ex vivo lung regeneration remains limited by the inability to recapitulate mature, functional alveolar epithelium. Here, we modulate multimodal components of the alveolar epithelial type 2 cell (AEC2) niche in decellularized lung scaffolds in order to guide AEC2 behavior for epithelial regeneration. First, endothelial cells coordinate with fibroblasts, in the presence of soluble growth and maturation factors, to promote alveolar scaffold population with surfactant-secreting AEC2s. Subsequent withdrawal of Wnt and FGF agonism synergizes with tidal-magnitude mechanical strain to induce the differentiation of AEC2s to squamous type 1 AECs (AEC1s) in cultured alveoli, in situ. These results outline a rational strategy to engineer an epithelium of AEC2s and AEC1s contained within epithelial-mesenchymal-endothelial alveolar-like units, and highlight the critical interplay amongst cellular, biochemical, and mechanical niche cues within the reconstituting alveolus.