The remarkable regenerative capacity of the lung suggests that stem cells could be of therapeutic importance in diverse lung diseases; however, the successful exploitation of lung stem cell biology has long been hampered by our inability to maintain and expand adult lung stem cells while retaining their multi-lineage potential in vitro. Recently, advances in our understanding of stem cell niches and the role of key signalling modulators in controlling stem cell maintenance and differentiation have fuelled the development of new in vitro three-dimensional (3D) culture technologies that sustain the stem cell-driven formation of near-physiological, self organizing structures called organoids. Here we review basic approaches to organoid model systems and highlight recent achievements in the generation of organoids from adult stem and progenitor cells of both the murine and human lungs. We evaluate current applications in studying cellular changes in proliferation, differentiation, plasticity, and cell polarity, and cellular and molecular crosstalk of epithelial cells with stroma. Advantages and limitations of organoids for clinical use are also discussed.