Tissue regeneration involves various types of cellular and molecular responses depending on the type of tissue and the injury or disease that is inflicted. While many tissues contain dedicated stem/progenitor cell lineages, many others contain cells that, during homeostasis, are considered physiologically functional and fully differentiated but, after injury or in disease states, exhibit stem/progenitor-like activity. Recent identification of subsets of defined cell types as facultative stem/progenitor cells has led to a re-examination of how certain tissues respond to injury to mount a regenerative response. In this review, we focus on lung regeneration to explore the importance of facultative regeneration controlled by functional and differentiated cell lineages as well as how they are positioned and regulated by distinct tissue niches. Additionally, we discuss the molecular signals to which cells respond in their differentiated state during homeostasis and those signals that promote effective regeneration of damaged or lost cells and structures after injury.