Chronic obstructive pulmonary disease (COPD) is a progressive disease that obstructs the airflow from the lungs, and tobacco smoking is the major cause of COPD. Here, we applied single-cell RNA sequencing to analyze COPD pathogenesis in COPD patients, non-COPD smokers and never-smokers and investigated the disease progression at single-cell resolution. By single-cell transcriptome analysis, COPD was characterized by shifts in the stromal, immune system and epithelial cell compositions. While epithelial components in never-smokers were relatively uniform, the smoker groups presented with extensive heterogeneity in epithelial cells, particularly in the alveolar type II (AT2) lineages. We identified a subpopulation of AT2 epithelial cells that emerged in smokers, such as COPD patients, and specifically expressed a series of chemokines and PD-L1. A trajectory analysis revealed that the inflammatory AT2 cell subpopulation followed a unique differentiation path, and a prediction model of cell-to-cell interactions inferred increased intercellular networks of inflammatory AT2 cells with immune and stromal cell populations. Thus, our analysis reveals a unique cellular differentiation pathway and function underlying the biological and clinical characteristics of COPD pathogenesis.