Chronic lung diseases characterized by irrecoverable damage of the airway epithelium range among the leading causes of death worldwide. To develop a successful cell therapeutic approach, detailed mechanisms of lung stem cell behavior and niche interactions need to be elucidated. Lung basal cells (BCs) comprise the most potent lung stem cell population and are capable of reconstituting all other airway epithelial cell types. Here, we developed a protocol for the generation of BCs from human induced pluripotent stem cells (hiPSCs) using a teratoma model in NSG mice. When injected subcutaneously into mice, hiPSC gave rise to teratoma with organized lung structures of pseudostratified epithelium including basal, club and ciliated cells as could be seen by immunohistochemical staining of their respective markers p63/CK5, CC10 and acetylated tubulin. Total yield of NGFR⁺/CD49f⁺ basal cells was 1.1 %. We established hiPSCs conditionally expressing the lung transcription factor NKX2.1 upon stimulation with doxycycline. When induced in vivo, these modified cells increased total basal cell counts in teratomas to 2.6 %. In vitro priming towards definitive or anterior foregut endoderm increased the yield to 4.9 and 5.4 %, respectively. Isolated basal cells were able to form ciliated epithelium proving their functional identity. Taken together, we have developed a robust protocol for the generation of airway basal cells from hiPSCs in a teratoma assay. Due to its cellular surroundings, the system provides a complexity that might provide additional insights to the knowledge gained in current state-of-the-art hiPSC-derived systems such as lung organoids or hiPSC-derived ALI cultures.