The human lung differs substantially from its mouse counterpart, resulting in a distinct distal airway architecture affected by disease pathology in chronic obstructive pulmonary disease. In humans, the distal branches of the airway interweave with the alveolar gas-exchange niche, forming an anatomical structure known as the respiratory bronchioles. Owing to the lack of a counterpart in mouse, the cellular and molecular mechanisms that govern respiratory bronchioles in the human lung remain uncharacterized. Here we show that human respiratory bronchioles contain a unique secretory cell population that is distinct from cells in larger proximal airways. Organoid modelling reveals that these respiratory airway secretory (RAS) cells act as unidirectional progenitors for alveolar type 2 cells, which are essential for maintaining and regenerating the alveolar niche. RAS cell lineage differentiation into alveolar type 2 cells is regulated by Notch and Wnt signalling. In chronic obstructive pulmonary disease, RAS cells are altered transcriptionally, corresponding to abnormal alveolar type 2 cell states, which are associated with smoking exposure in both humans and ferrets. These data identify a distinct progenitor in a region of the human lung that is not found in mouse that has a critical role in maintaining the gas-exchange compartment and is altered in chronic lung disease.