Idiopathic pulmonary fibrosis (IPF) is a devastating interstitial lung disease with dire consequences and in urgent need of improved therapies. Compelling evidence indicates that damage or dysfunction of AT2s is of central importance in the development of IPF. We recently identified a novel AT2 subpopulation characterized by low SFTPC expression but that is enriched for PD-L1 in mice. These cells represent quiescent, immature AT2 cells during normal homeostasis and expand upon pneumonectomy (PNX) and were consequently named injury-activated alveolar progenitors (IAAPs). FGF10 is shown to play critical roles in lung development, homeostasis, and injury repair demonstrated in genetically engineered mice. In an effort to bridge the gap between the promising properties of endogenous Fgf10 manipulation and therapeutic reality, we here investigated whether the administration of exogenous recombinant FGF10 protein (rFGF10) can provide preventive and/or therapeutic benefit in a mouse model of bleomycin-induced pulmonary fibrosis with a focus on its impact on IAAP dynamics. C57BL/6 mice and Sftpc^CreERT2/+; tdTomato^flox/+ mice aged 8–10 weeks old were used in this study. To induce the bleomycin (BLM) model, mice were intratracheally (i.t.) instilled with BLM (2 μg/g body weight). BLM injury was induced after a 7-day washout period following tamoxifen induction. A single i.t. injection of rFGF10 (0.05 μg/g body weight) was given on days 0, 7, 14, and 21 after BLM injury. Then, the effects of rFGF10 on BLM-induced fibrosis in lung tissues were assessed by H&E, IHC, Masson’s trichrome staining, hydroxyproline and Western blot assays. Immunofluorescence staining and flow cytometry was used to assess the dynamic behavior of AT2 lineage-labeled Sftpc^Pos (IAAPs and mature AT2) during the course of pulmonary fibrosis. We observed that, depending on the timing of administration, rFGF10 exhibited robust preventive or therapeutic efficacy toward BLM-induced fibrosis based on the evaluation of various pathological parameters. Flow cytometric analysis revealed a dynamic expansion of IAAPs for up to 4 weeks following BLM injury while the number of mature AT2s was drastically reduced. Significantly, rFGF10 administration increased both the peak ratio and the duration of IAAPs expansion relative to EpCAM^Pos cells. Altogether, our results suggest that the administration of rFGF10 exhibits therapeutic potential for IPF most likely by promoting IAAP proliferation and alveolar repair.