Alveologenesis is the culmination of lung development and involves the correct temporal and spatial signals to generate the delicate gas exchange interface required for respiration. Using a Wnt-signaling reporter system, we demonstrate the emergence of a Wnt-responsive alveolar epithelial cell sublineage, which arises during alveologenesis, called the axin2+ alveolar type 2 cell, or AT2^Axin2. The number of AT2^Axin2 cells increases substantially during late lung development, correlating with a wave of Wnt signaling during alveologenesis. Transcriptome analysis, in vivo clonal analysis, and ex vivo lung organoid assays reveal that AT2s^Axin2 promote enhanced AT2 cell growth during generation of the alveolus. Activating Wnt signaling results in the expansion of AT2s, whereas inhibition of Wnt signaling inhibits AT2 cell development and shunts alveolar epithelial development toward the alveolar type 1 cell lineage. These findings reveal a wave of Wnt-dependent AT2 expansion required for lung alveologenesis and maturation.