Epithelial cells are charged with protection at barrier sites, but whether this normally beneficial response might sometimes become dysfunctional still needs definition. Here, we recognized a pattern of imbalance marked by basal epithelial cell growth and differentiation that replaced normal airspaces in a mouse model of progressive postviral lung disease due to the Sendai virus. Single-cell and lineage-tracing technologies identified a distinct subset of basal epithelial stem cells (basal ESCs) that extended into gas-exchange tissue to form long-term bronchiolar-alveolar remodeling regions. Moreover, this cell subset was selectively expanded by crossing a cell-growth and survival checkpoint linked to the nuclear-localized alarmin IL-33 that was independent of IL-33 receptor signaling and instead connected to autocrine chromatin accessibility. This mechanism creates an activated stem-progenitor cell lineage with potential for physiological or pathological function. Thus, conditional loss of Il33 gene function in basal epithelial cells disrupted the homeostasis of the epithelial barrier at skin and gut sites but also markedly attenuated postviral disease in the lung based on the downregulation of remodeling and inflammation. Thus, we define a basal ESC strategy to deploy innate immune machinery that appears to overshoot the primordial goal of self-defense. Our findings reveal new targets to stratify and correct chronic and often deadly postviral disease.