Lambda interferons (IFNλs) or type III IFNs share homology, expression patterns, signaling cascades, and antiviral functions with type I IFNs. This has complicated the unwinding of their unique non-redundant roles. Through the systematic study of influenza virus infection in mice, we herein show that IFNλs are the first IFNs produced that act at the epithelial barrier to suppress initial viral spread without activating inflammation. If infection progresses, type I IFNs come into play to enhance viral resistance and induce pro-inflammatory responses essential for confronting infection but causing immunopathology. Central to this are neutrophils which respond to both cytokines to upregulate antimicrobial functions but exhibit pro-inflammatory activation only to type I IFNs. Accordingly, Ifnlr1^−/− mice display enhanced type I IFN production, neutrophilia, lung injury, and lethality, while therapeutic administration of PEG-IFNλ potently suppresses these effects. IFNλs therefore constitute the front line of antiviral defense in the lung without compromising host fitness.