Influenza A virus (IAV) infection mobilizes bone marrow-derived macrophages (BMDM) that gradually undergo transition to tissue-resident alveolar macrophages (TR-AM) in the inflamed lung. Combining high-dimensional single-cell transcriptomics with complex lung organoid modeling, in vivo adoptive cell transfer, and BMDM-specific gene targeting, we found that transitioning (“regenerative”) BMDM and TR-AM highly express Placenta-expressed transcript 1 (Plet1). We reveal that Plet1 is released from alveolar macrophages, and acts as important mediator of macrophage-epithelial cross-talk during lung repair by inducing proliferation of alveolar epithelial cells and re-sealing of the epithelial barrier. Intratracheal administration of recombinant Plet1 early in the disease course attenuated viral lung injury and rescued mice from otherwise fatal disease, highlighting its therapeutic potential. https://www.nature.com/articles/s41467-023-44421-6