Human tumors are highly heterogeneous at the cellular, molecular, genetic and functional levels. Tumor heterogeneity has tremendous impact on cancer progression and treatment responses. However, the mechanisms for tumor heterogeneity have been poorly understood due to the lack of experimental models. This study provides a novel exploration and analysis of the impacts of cellular and molecular heterogeneity of human lung epithelial cells on their malignant transformation following chronic exposure to cigarette smoke extracts. The ability of cigarette smoke extract (CSE) to cause malignant transformation of the human bronchial epithelial cells (16HBE) is dependent on the sizes of the cells. Epithelial-mesenchymal transition (EMT) plays an important role in this process. Mechanistically, CSE-induced malignant transformation of 16HBE cells was closely linked to the reduced relative telomere length of the larger 16HBE cells, thereby up-regulation of the expression of stemness genes. These findings provide novel insights for understanding the impact of cellular heterogeneity in lung cancer development. The in vitro transformation model described in this study could be extrapolated to studying the pathogenesis of other malignancies, as well as for mechanistic studies that are not feasible in vivo.