Thyroid transcription factor-1 (TTF-1) and hepatocyte nuclear factor-3β (HNF-3β) are nuclear proteins that induce expression of the surfactant protein genes in vitro by binding to specific regulatory elements of these target genes. In vivo, TTF-1 and HNF-3β are expressed in the pulmonary epithelium throughout lung development and are critical determinants of lung morphogenesis and gene expression. In order to assess the role of these factors in the development of pulmonary malformations, immunohistochemistry (IMHC) for TTF-1 and HNF-3β was performed on paraffin-embedded autopsy samples from three full term infants with unexplained acinar dysplasia in which lung development was arrested in the pseudoglandular or canalicular stages of development. TTF-1 and HNF-3β expression was also correlated with cytodifferentiation by IMHC using antisera generated against a panel of epithelial and mesenchymal cell markers including alveolar Type I and Type II cell antigens, ciliated and Clara cell antigens, endothelial and smooth muscle cell antigens, and non-specific epithelial cell markers. Only the sample arrested in the canalicular stage of development - with evidence of acinar tubule and saccule formation - was positive for TTF-1, HNF-3β, and markers of alveolar Type I and Type II cell differentiation. Absence of immunostaining for TTF-1, HNF-3β, and surfactant proteins A, B, and C in the other two cases, arrested in the pseudoglandular stage of lung development, was associated with a total lack of normal peripheral airway and/or acini formation. Although formation of the bronchial tree was variable in these two latter cases, cytodifferentiation of the bronchial epithelium was evident by the presence of ciliated cells, PAS-positive goblet cells, and immunostaining for cytokeratin. These data support the hypothesis that expression of TTF-1 and HNF-3β is critical for normal human lung development and cytodifferentiation of the distal respiratory epithelium. Supported by NIH HD20748.