Lung adenocarcinoma is responsible for significant global mortality with limited effective treatments. Although some studies suggest that these tumors arise from alveolar epithelial type 2 cells (AEC2s), there is scant information regarding the early events that might occur in human AEC2s at the inception of oncogenesis. This limitation, is partially due to a lack of human model systems that recapitulate the initiation of oncogenesis in AEC2s. Unfortunately, primary AEC2s from patients are difficult to access in vivo or stably maintain in cell cultures. Hence, we sought to develop an in vitro system to model the early stages of oncogenesis utilizing human induced AEC2s (iAEC2s) generated through the directed differentiation of induced pluripotent stem cells (iPSCs). To this end, we selected a normal human iPSC line we have previously engineered to carry fluorochrome reporters targeted to lung epithelial-specific loci, NKX2-1GFP and SFTPCtdTomato that enable monitoring and purification of alveolar lung epithelial cells. To test the effects of adenocarcinoma oncogene induction in these cells, we targeted a third locus, AAVS1 using gene editing to engineer a doxycycline-inducible cassette encoding mutant KRASG12D, the most commonly found oncogene in lung adenocarcinomas. Successful induction of KRASG12D with doxycycline was demonstrated in both the targeted undifferentiated iPSCs as well as in the iAEC2s derived from these cells. We profiled the downstream effects of KRASG12D induction in iAEC2s, comparing dox vs vehicle exposed cells by cell counting, FACS for NKX2-1GFP/SFTPCtdTomato, RT-qPCR, deep proteomic and phosphoproteomic analyses, and scRNA-sequencing. Through this characterization, we found that induction of KRASG12D robustly activates MAPK signaling resulting in a shift of iAEC2s away from their mature alveolar program towards a distal lung epithelial progenitor phenotype. Successful modeling of lung adenocarcinoma with this model system has a variety of future applications, including testing unknown mechanisms for oncogenesis, discovery of novel biomarkers of disease, or development of new effective treatment methods through drug screening.