Preinvasive squamous lung lesions are precursors of lung squamous cell carcinoma (LUSC). The cellular events underlying lesion formation are unknown. Using a carcinogen-induced model of LUSC with no added genetic hits or cell type bias, we found that carcinogen exposure leads to non-neutral competition among basal cells, aberrant clonal expansions, and basal cell mobilization along the airways. Ultimately, preinvasive lesions developed from a few highly mutated clones that dominate most of the bronchial tree. Multisite sequencing in human patients confirmed the presence of clonally related preinvasive lesions across distinct airway regions. Our work identifies a transition in basal cell clonal dynamics, and an associated shift in basal cell fate, as drivers of field cancerization in the lung.