Introduction: Honeycomb cysts (HC) within the alveolar region are distinct histopathological features in the lungs of idiopathic pulmonary fibrosis (IPF) patients. HC are lined with a bronchiolar-like epithelium consisting of basal cells (BC), and differentiated ciliated- and secretory epithelial cells. By using primary IPF-derived alveolar BC, we here aimed to establish a 3D organoid model that mimics HC in IPF. Methods: IPF alveolar BC were embedded in Matrigel and cultured in differentiation medium supplemented with ROCK inhibitor (Y-27632), TGF-ß inhibitor (A83-01), DCI (dexamethasone, 8-Bromo-cAMP, IBMX), fibroblast growth factor (FGF)-2, FGF-10, and epithelial growth factor (EGF) for 21 days. Colony forming efficiency (CFE) was determined and cell marker expression analyzed by TaqMan RT-PCR and immunofluorescence. Results: Alveolar BC expand in numbers and start to self-assemble into clusters at day 3. Organoids first formed after 7 days (>50µm diameter) and continued to grow over a period of 21 days. A polarized lumen was present in 40% of the organoids after 21 days. Beating cilia and mucus secretion was observed between 10-15 days. After 20 days, a 3-10% CFE of organoids with a diameter of 50-280µm was calculated. After 21 days, organoids displayed a heterogenous cell population expressing basal (KRT5, KRT17, TP63)-, ciliated (AcTub)-, and secretory (SCGB1A1, MUC5AC, MUC5B) epithelial cell markers. Conclusion: Organoids reconstituted functional and morphological properties of the in vivo HC in IPF lungs and therefore represents a valuable in vitro tool to study honeycomb formation, and its potential therapeutic inhibition.