LKB1 is among the most frequently altered tumor suppressors in lung adenocarcinoma. Inactivation of Lkb1 accelerates the growth and progression of oncogenic KRAS-driven lung tumors in mouse models. However, the molecular mechanisms by which LKB1 constrains lung tumorigenesis and whether the cancer state that stems from Lkb1 deficiency can be reverted remains unknown. To identify the processes governed by LKB1 in vivo, we generated an allele which enables Lkb1 inactivation at tumor initiation and subsequent Lkb1 restoration in established tumors. Restoration of Lkb1 in oncogenic KRAS-driven lung tumors suppressed proliferation and led to tumor stasis. Lkb1 restoration activated targets of C/EBP transcription factors and drove neoplastic cells from a progenitor-like state to a less proliferative alveolar type II cell-like state. We show that C/EBP transcription factors govern a subset of genes that are induced by LKB1 and depend upon NKX2-1. We also demonstrate that a defining factor of the alveolar type II lineage, C/EBPα, constrains oncogenic KRAS-driven lung tumor growth in vivo. Thus, this key tumor suppressor regulates lineage-specific transcription factors, thereby constraining lung tumor development through enforced differentiation.