Lung progenitor (LP) cells identified by the expression of transcription factor NK2 homeobox 1 (NKX2.1) are essential for development of all lung epithelial cell types and hold tremendous potential for pulmonary research and translational regenerative medicine applications. Here we present engineered hydrogels as a promising alternative to the naturally derived materials that are often used to differentiate human induced pluripotent stem cells (iPSCs) into LP cells. Poly(ethylene glycol) norbornene (PEGNB) hydrogels with defined composition were used to systematically investigate the role of microenvironmental stiffness, cell origin, and splitting during the differentiation process. Results demonstrated each factor impacted LP differentiation efficiency and that the soft hydrogels replicating healthy lung stiffness (Elastic modulus (E), E = 4.00 ± 0.25 kPa) produced the highest proportion of LP cells based on flow cytometric analysis results (54%) relative to the stiff hydrogels (48%) and Matrigel controls (32%) at the end of the non-split differentiation protocol. Collectively these results showed that engineered hydrogels provide a well-defined microenvironment for iPSC-to-LP differentiation and perform as effectively as the current gold standard Matrigel-coated tissue culture plastic. Adopting engineered biomaterials in cell culture protocols may enable greater control over differentiation parameters and has the potential to enhance the clinical translation of iPSC-derived LP cells.