Lung adenocarcinoma (LUAD) is the most prevalent subtype of lung cancer and presents clinically with a high degree of biological heterogeneity and distinct clinical outcomes. The current paradigm of LUAD etiology posits alveolar epithelial type II (AT2) cells as the primary cell of origin, while the role of AT1 cells in LUAD oncogenesis remains unknown. Here, we examine oncogenic transformation in mouse Gram-domain containing 2 (Gramd2)⁺ AT1 cells via oncogenic KRAS^G12D. Activation of KRAS^G12D in AT1 cells induces multifocal LUAD, primarily of papillary histology. Furthermore, KRT8⁺ intermediate cell states were observed in both AT2- and AT1-derived LUAD, but SCGB3A2⁺, another intermediate cell marker, was primarily associated with AT1 cells, suggesting different mechanisms of tumor evolution. Collectively, our study reveals that Gramd2⁺ AT1 cells can serve as a cell of origin for LUAD and suggests that distinct subtypes of LUAD based on cell of origin be considered in the development of therapeutics.