A method of preparing a population of in vitro cultured cells of alveolar epithelial type II (ATII) cell lineage derived from at least one embryonic stem cell is disclosed which comprises (a) culturing said at least one embryonic stem cell in vitro in a medium comprising MATRIGEL®, to produce differentiated cells without formation of an embryonic body, wherein at least some of the differentiated cells are of ATII cell phenotype； (b) identifying the differentiated cells of ATII cell phenotype by detecting expression of at least one biomarker of ATII cells； (c) isolating the differentiated cells having ATII cell phenotype； and (d) cloning the isolated cells to produce a population of cells having ATII cell phenotype. The resulting cells are preferably >；99% pure ATII phenotype lineage and are potentially useful therapeutically for treating lung injury and disease.
