Alveolar epithelial type 2 (AT2) cells integrate signals from multiple molecular pathways to proliferate and differentiate to drive regeneration of the lung alveolus. Utilizing in vivo genetic and ex vivo organoid models, we investigated the role of Fgfr2 signaling in AT2 cells across the lifespan and during adult regeneration after influenza infection. We show that, although dispensable for adult homeostasis, Fgfr2 restricts AT2 cell fate during postnatal lung development. Using an unbiased computational imaging approach, we demonstrate that Fgfr2 promotes AT2 cell proliferation and restrains differentiation in actively regenerating areas after injury. Organoid assays reveal that Fgfr2-deficient AT2 cells remain competent to respond to multiple parallel proliferative inputs. Moreover, genetic blockade of AT2 cell cytokinesis demonstrates that cell division and differentiation are uncoupled during alveolar regeneration. These data reveal that Fgfr2 maintains AT2 cell fate, balancing proliferation and differentiation during lung alveolar regeneration.