Basal cells (BCs) are p63-expressing multipotent progenitors of skin, tracheoesophageal and urinary tracts. p63 is abundant in developing airways; however, it remains largely unclear how embryonic p63+ cells contribute to the developing and postnatal respiratory tract epithelium, and ultimately how they relate to adult BCs. Using lineage-tracing and functional approaches in vivo, we show that p63+ cells arising from the lung primordium are initially multipotent progenitors of airway and alveolar lineages but later become restricted proximally to generate the tracheal adult stem cell pool. In intrapulmonary airways, these cells are maintained immature to adulthood in bronchi, establishing a rare p63+Krt5- progenitor cell population that responds to H1N1 virus-induced severe injury. Intriguingly, this pool includes a CC10 lineage-labeled p63+Krt5- cell subpopulation required for a full H1N1-response. These data elucidate key aspects in the establishment of regionally distinct adult stem cell pools in the respiratory system, potentially with relevance to other organs.