Alveologenesis is an essential developmental process that increases the surface area of the lung through the formation of septal ridges. In the mouse, septation occurs postnatally and is thought to require the alveolar myofibroblast (AMF). Though abundant during alveologenesis, markers for AMFs are minimally detected in the adult. After septation, the alveolar walls thin to allow efficient gas exchange. Both loss of AMFs or retention and differentiation into another cell type during septal thinning have been proposed. Using a novel Fgf18:CreERT2 allele to lineage trace AMFs, we demonstrate that most AMFs are developmentally cleared during alveologenesis. Lung mesenchyme also contains other poorly described cell types, including alveolar lipofibroblasts (ALF). We show that Gli1:CreERT2 marks both AMFs as well as ALFs, and lineage tracing shows that ALFs are retained in adult alveoli while AMFs are lost. We further show that multiple immune cell populations contain lineage-labeled particles, suggesting a phagocytic role in the clearance of AMFs. The demonstration that the AMF lineage is depleted during septal thinning through a phagocytic process provides a mechanism for the clearance of a transient developmental cell population.