YAP/TAZ signaling is required for initiation of lung alveolar repair, yet previous studies in idiopathic pulmonary fibrosis (IPF) predicted increased YAP/TAZ signaling in alveolar epithelial cells (AECs). We investigated whether persistent YAP/TAZ AEC signaling contributes to failed epithelial repair and persistent fibrotic remodeling. In IPF lungs, we identified increased YAP+/TAZ+ AECs and increased expression of YAP/TAZ transcriptional targets compared to donor control lungs. In human lung organoids, pharmacological YAP/TAZ activation resulted in phenotype shifts of AECs into aberrant transitional states. In mice with Yap/Taz activation (YTactive) resulting from deletion of Hippo-kinases Stk3/4 in alveolar-type 2 (AT2) cells, resulted in persistent fibrotic remodeling at 28- and 56-days post-bleomycin injury. Gene promoter activity associated with transitional cell markers (Krt19, Hopx, and Runx2) was increased in YTactive AT2 cells. Immunofluorescent staining showed a loss of AT2 associated Cebpa and increased Krt19 in YTactive lineage traced AT2 cells 28 days post-injury. Inhibition of Yap/Taz using Verteporfin resulted in improved lung repair in YTactive mouse lungs, including increased Cebpa and decreased Krt19+ transitional cells. These findings demonstrate sustained Yap/Taz activation drives abnormal alveolar repair and persistent fibrotic remodeling. Blocking aberrant persistent Yap/Taz activity promotes adaptive repair and has potential as a therapeutic strategy for PF.