The epithelium lining the airways of the adult human lung is composed of ciliated and secretory cells together with undifferentiated basal cells (BCs). The composition and organization of this epithelium is severely disrupted in many respiratory diseases. However, little is known about the mechanisms controlling airway homeostasis and repair after epithelial damage. Here, we exploit the mouse tracheobronchial epithelium, in which BCs function as resident stem cells, as a genetically tractable model of human small airways. Using a reporter allele we show that the low level of Notch signaling at steady state is greatly enhanced during repair and the generation of luminal progenitors. Loss-of-function experiments show that Notch signaling is required for the differentiation, but not self-renewal, of BCs. Moreover, sustained Notch activation in BCs promotes their luminal differentiation, primarily towards secretory lineages. We also provide evidence that this function of Notch signaling is conserved in BCs from human airways.