Influenza virus outbreaks remain a serious threat to public health. Greater understanding of how cells targeted by the virus respond to the infection can provide insight into the pathogenesis of disease. Here we examined the transcriptional profile of in vivo infected and uninfected type 2 alveolar epithelial cells (AEC) in the lungs of influenza virus infected mice. We show for the first time the unique gene expression profiles induced by the in vivo infection of AEC as well as the transcriptional response of uninfected bystander cells. This work allows us to distinguish the direct and indirect effects of infection at the cellular level. Transcriptome analysis revealed that although directly infected and bystander AEC from infected animals shared many transcriptome changes when compared to AEC from uninfected animals, directly infected cells compared to bystander uninfected AEC produce more interferon and express lower Wnt signaling associated transcripts, while concurrently expressing more transcripts associated with cell death pathways. The Wnt signaling pathway was downregulated in both in vivo infected AEC and in vitro infected human lung epithelial A549 cells. Wnt signaling did not affect type I and III interferon production by infected A549 cells. Our results reveal unique transcriptional changes that occur within infected AEC and show that influenza virus downregulates Wnt signaling. In light of recent findings that Wnt signaling is essential for lung epithelial stem cells, our findings reveal a mechanism by which influenza virus may affect host lung repair.IMPORTANCE Influenza virus infection remains a major public health problem. Utilizing a recombinant green fluorescent protein expressing influenza virus we compared the in vivo transcriptomes of directly infected and uninfected bystander cells from infected mouse lungs and discovered many pathways uniquely regulated in each population. The Wnt signaling pathway was downregulated in directly infected cells and was shown to affect virus but not interferon production. Our study is the first to discern the in vivo transcriptome changes induced by direct viral infection as compared to mere exposure to the lung inflammatory milieu and highlight the downregulation of Wnt signaling. This downregulation has important implications for understanding influenza virus pathogenesis as Wnt signaling is critical for lung epithelial stem cells and lung epithelial cell differentiation. Our findings reveal a mechanism by which influenza virus may affect host lung repair and suggest interventions that prevent damage or accelerate recovery of the lung.