We describe a bioinspired microfluidic system that resembles pulmonary airways and enables on-chip generation of airway occluding liquid plugs from a stratified Air-liquid two-phase flow. User-defined changes in the air stream pressure facilitated by mechanical components and tuning the wettability of the microchannels enable generation of well-defined liquid plugs. Significant differences are observed in liquid plug generation and propagation when surfactant is added to the buffer. The plug flow patterns suggest a protective role of surfactant for airway epithelial cells against pathological flow-induced mechanical stresses. We discuss the implications of the findings for clinical settings. This approach and the described platform will enable systematic investigation of the effect of different degrees of fluid mechanical stresses on lung injury at the cellular level and administration of exogenous therapeutic surfactants.