End-stage lung disease is a major health care challenge. Lung transplantation remains the definitive treatment, yet rejection and donor organ shortage limit its broader clinical impact. Engineering bioartificial lung grafts from patient-derived cells could theoretically lead to alternative treatment strategies. Although many challenges on the way to clinical application remain, important early milestones toward translation have been met. Key endodermal progenitors can be derived from patients and expanded in vitro. Advanced culture conditions facilitate the formation of three-dimensional functional tissues from lineage-committed cells. Bioartificial grafts that provide gas exchange have been generated and transplanted into animal models. Looking ahead, current challenges in bioartificial lung engineering include creation of ideal scaffold materials, differentiation and expansion of lung-specific cell populations and full maturation of engineered constructs to provide graft longevity after implantation in vivo. A multidisciplinary collaborative effort will not only bring us closer to the ultimate goal of engineering patient-derived lung grafts, but also generate a series of clinically valuable translational milestones such as airway grafts and disease models. This review summarizes achievements to date, current challenges and ongoing research in bioartificial lung engineering.