Aging poses a global public health challenge, associated with molecular and physiological changes in the lungs. It increases susceptibility to acute and chronic lung diseases, yet the underlying molecular and cellular drivers in aged populations are not fully appreciated. To systematically profile the genetic changes associated with age, we present a single-cell transcriptional atlas comprising nearly half a million cells from the healthy lungs of human subjects spanning various ages, sexes, and smoking statuses. Most annotated cell lineages in aged lungs exhibit dysregulated genetic programs. Specifically, the aged alveolar epithelial cells, including both alveolar type II (AT2) and type I (AT1) cells, demonstrate loss of epithelial identities, heightened inflammaging characterized by increased expression of AP-1 transcription factor and chemokine genes, and significantly increased cellular senescence. Furthermore, the aged mesenchymal cells display a remarkable decrease in Collagen and Elastin transcription. The decline of the AT2 niche is further exacerbated by a weakened endothelial cell phenotype and a dysregulated genetic program in macrophages. These findings highlight the dysregulation observed in both AT2 stem cells and their supportive niche cells, potentially contributing to the increased susceptibility of aged populations to lung diseases.