The alveolar epithelium serves as a barrier between the body and the external environment. To maintain efficient gas exchange, the alveolar epithelium has evolved to withstand and rapidly respond to an assortment of inhaled, injury-inducing stimuli. However, alveolar damage can lead to loss of alveolar fluid barrier function and exuberant, non-resolving inflammation that manifests clinically as acute respiratory distress syndrome (ARDS). This review discusses recent discoveries related to mechanisms of alveolar homeostasis, injury, repair, and regeneration, with a contemporary emphasis on virus-induced lung injury. In addition, we address new insights into how the alveolar epithelium coordinates injury-induced lung inflammation and review maladaptive lung responses to alveolar damage that drive ARDS and pathologic lung remodeling.