The diversity of mesenchymal cell types in the lung that influence epithelial homeostasis and regeneration is poorly defined. We used genetic lineage tracing, single-cell RNA sequencing, and organoid culture approaches to show that Lgr5 and Lgr6, well-known markers of stem cells in epithelial tissues, are markers of mesenchymal cells in the adult lung. Lgr6+ cells comprise a subpopulation of smooth muscle cells surrounding airway epithelia and promote airway differentiation of epithelial progenitors via Wnt-Fgf10 cooperation. Genetic ablation of Lgr6+ cells impairs airway injury repair in vivo. Distinct Lgr5+ cells are located in alveolar compartments and are sufficient to promote alveolar differentiation of epithelial progenitors through Wnt activation. Modulating Wnt activity altered differentiation outcomes specified by mesenchymal cells. This identification of region- and lineage-specific crosstalk between epithelium and their neighboring mesenchymal partners provides new understanding of how different cell types are maintained in the adult lung. Display omitted •Lgr5 and Lgr6 mark mesenchymal cells in adult lungs•Single-cell transcriptome analysis defines mesenchymal heterogeneity•Distinct mesenchymal niches drive airway and alveolar differentiation•Wnt activity affects epithelial differentiation specified by mesenchymal cells Heterogeneous mesenchymal cell populations in the lung play a central role in epithelial maintenance and alveolar differentiation.