Tissue regeneration requires coordinated and dynamic remodeling of stem and progenitor cells and the surrounding niche. Although the plasticity of epithelial cells has been well explored in many tissues, the dynamic changes occurring in niche cells remain elusive. Here, we show that, during lung repair after naphthalene injury, a population of PDGFRα cells emerges in the non-cartilaginous conducting airway niche, which is normally populated by airway smooth muscle cells (ASMCs). This cell population, which we term "repair-supportive mesenchymal cells" (RSMCs), is distinct from conventional ASMCs, which have previously been shown to contribute to epithelial repair. Gene expression analysis on sorted lineage-labeled cells shows that RSMCs express low levels of ASMC markers, but high levels of the pro-regenerative marker Fgf10. Organoid co-cultures demonstrate an enhanced ability for RSMCs in supporting club-cell growth. Our study highlights the dynamics of mesenchymal cells in the airway niche and has implications for chronic airway-injury-associated diseases.