Epithelial-mesenchymal cell competition coordinates fate transitions across tissue compartments during lung development and fibrosis.

The coordination between epithelial progenitors and their mesenchymal niche is critical for organogenesis and repair, yet the mechanisms governing their competitive interactions remain unclear. Here, we reveal a paradigm of tissue-scale fitness sensing in the lung, where mesenchymal Yap levels antagonize epithelial Yap levels to dictate epithelial stem cell fate. We show that reduced fitness in alveolar fibroblasts (AF1s) via Yap/Taz or Myc deletion leads to their apoptotic elimination and a collapse of the alveolar stem cell niche. This niche collapse triggers a pathological competitive response from the epithelium, which undergoes aberrant bronchiolization that phenocopies human pulmonary fibrosis. Mechanistically, we uncovered a molecular switch that controls mesenchymal fate. During development and fibrosis resolution, Snail1/2 sequesters Yap/Taz to drive an adipogenic program, generating niche-supportive AF1s. Conversely, Yap/Taz-TEAD-Myc binding instructs a myogenic, pro-fibrotic program. Our findings demonstrate that inter-tissue cell competition, governed by a Snail/Yap rheostat, orchestrates lung architecture and provides a framework for targeting the mesenchymal niche to treat fibrotic disease.