Repeated injury of the lung epithelium is proposed to be a main driver of idiopathic pulmonary fibrosis (IPF). However, none of the available therapies target the epithelium and there is a limited amount of human models of fibrotic epithelial damage with suitability for drug screening and discovery. We developed a model of the epithelial reprogramming seen in IPF using alveolar organoids derived from human induced pluripotent stem cells stimulated with a cocktail of pro-fibrotic and inflammatory cytokines. This fibrosis cocktail induced persistent epithelial reprogramming and expression of extracellular matrix. Deconvolution of RNA-seq data indicated that the fibrosis cocktail increased the proportion of cells with the KRT5 - /KRT17 + aberrant basaloid phenotype, recently identified in the lungs of IPF patients. Treatment with nintedanib and pirfenidone had effects on markers of extracellular matrix, pro-fibrotic mediators and epithelial reprogramming. Thus, our system recapitulates key aspects of IPF and is a promising system for drug discovery.