Research on acute and chronic lung diseases would greatly benefit from reproducible availability of alveolar epithelial cells (AEC). Primary alveolar epithelial cells can be derived from human lung tissue but the quality of these cells is highly donor dependent. Here, we demonstrated that culture of EpCAM+ cells derived from human induced pluripotent stem cells (hiPSC) at the physiological air-liquid interface (ALI) resulted in type 2 AEC-like cells (iAEC2) with alveolar characteristics. iAEC2 cells expressed native AEC2 markers (surfactant proteins and LPCAT-1) and contained lamellar bodies. ALI-iAEC2 were used to study alveolar repair over a period of 2 weeks following mechanical wounding of the cultures and the responses were compared with those obtained using primary AEC2 (pAEC2) isolated from resected lung tissue. Addition of the Wnt/β-catenin activator CHIR99021 reduced wound closure in the iAEC2 cultures but not pAEC2 cultures. This was accompanied by decreased surfactant protein expression and accumulation of podoplanin-positive cells at the wound edge. These results demonstrated the feasibility of studying alveolar repair using hiPSC-AEC2 cultured at the ALI and indicated that this model can be used in the future to study modulation of alveolar repair by (pharmaceutical) compounds.