The tissue turnover of unperturbed adult lung is remarkably slow. However, after injury or insult, a specialised group of facultative lung progenitors become activated to replenish damaged tissue through a reparative process called regeneration. Disruption in this process results in healing by fibrosis causing aberrant lung remodelling and organ dysfunction. Post-insult failure of regeneration leads to various incurable lung diseases including chronic obstructive pulmonary disease (COPD) and idiopathic pulmonary fibrosis. Therefore, identification of true endogenous lung progenitors/stem cells, and their regenerative pathway are crucial for next-generation therapeutic development. Recent studies provide exciting and novel insights into postnatal lung development and post-injury lung regeneration by native lung progenitors. Furthermore, exogenous application of bone marrow stem cells, embryonic stem cells and inducible pluripotent stem cells (iPSC) show evidences of their regenerative capacity in the repair of injured and diseased lungs. With the advent of modern tissue engineering techniques, whole lung regeneration in the lab using de-cellularised tissue scaffold and stem cells is now becoming reality. In this review, we will highlight the advancement of our understanding in lung regeneration and development of stem cell mediated therapeutic strategies in combating incurable lung diseases.