Human alveolar type II (AT II) epithelial cells are valuable for the cellular therapy of lung disease. Human induced pluripotent stem cells (iPSCs) have the ability to generate AT II cells that can be used in modeling and treatment of lung disease caused by dysfunction of AT II cells. In this study, we present a simple, effective, and noninvasive way of obtaining human iPSCs from exfoliated renal epithelial cells, which exist in urine. Alkaline phosphatase (AP) staining, immunofluorescence staining, karyotyping, and teratoma experiments have proved that these iPSCs are pluripotent. Urinary iPSCs (UiPSCs) can differentiate into AT II cells with our four-step induction protocol. These cells have phenotypic properties similar to mature human AT II cells, such as outstretched and epithelium-like morphology and the specific expression markers of AT II cells (surfactant proteins A, B, and C). This study indicates that AT II cells can be generated from UiPSCs and these cells may be useful for the study of human lung development and regenerative medicine.