The high plasticity of lung epithelial cells, has for many years, confounded the correct identification of the cell-of-origin of lung adenocarcinoma (LUAD), one of the deadliest malignancies worldwide. Here, we employ lineage-tracing mouse models to investigate the cell of origin of Eml4-Alk LUAD, and show that Club and Alveolar type 2 (AT2) cells give rise to tumours. We focus on Club cell originated tumours and find that Club cells experience an epigenetic switch by which they lose their lineage fidelity and gain an AT2-like phenotype after oncogenic transformation. Single-cell transcriptomic analyses identified two trajectories of Club cell evolution which are similar to the ones used during lung regeneration, suggesting that lung epithelial cells leverage on their plasticity and intrinsic regeneration mechanisms to give rise to a tumour. Together, this study highlights the role of Club cells in LUAD initiation, identifies the mechanism of Club cell lineage infidelity, confirms the presence of these features in human tumours, and unveils key mechanisms conferring LUAD heterogeneity.