PTHrP is an autocrine and paracrine regulator of mammalian embryogenesis. In lung, PTHrP is produced by embryonic respiratory epithelium, type II (TII) cells and Clara cells; its receptor (the PTH/PTHrP-receptor) is expressed in adepithelial pulmonary mesenchyme. Targeted disruption of the murine PTHrP gene results in osteochondrodystrophy and neonatal lethality. Prompted by our previous studies of PTHrP-regulated surfactant biosynthesis, we examined pulmonary development in PTHrP-deficient (“knockout”) and normal fetal (E17.5-19.5) and newborn mice using: light and electron microscopy; immunohistochemistry; stereologic morphometry; tissue content of DNA, protein, glycogen and phospholipids; northern analysis for surfactant protein (SP-A,-B, -C) mRNAs; and [3H]-methylcholine incorporation into saturated phosphatidylcholine (PC). We determined that PTHrP deficiency is associated with lung hypoplasia, arrested canalicular development, impaired epithelial (TII) cytodifferentiation, lipid accumulation in pulmonary fibroblasts, and failure of septal remodeling. In PTHrP null animals that lived for several hours, the distal airways contained hyaline-like material that was immunoreactive for SP-B. PTHrP null lungs exhibited no significant developmental differences in surfactant protein mRNA levels. However, lung explants from PTHrP null fetuses incorporated choline into saturated PC at 37%(E17.5) and 39% (E18.5) levels of littermate controls (p<0.01, n=5-8). In order to exclude systemic effects and the influence of skeletal thoracic constriction, we maintained embryonic (E13.5, 14.5) lungs for 4-6 days in serum-free culture. Ultrastructural analysis of PTHrP null epithelium showed fewer mature features than did the epithelium of controls. We conclude that PTHrP plays an important role during mammalian lung development. Its actions, at least in part, appear to be governed through induction of epithelial-mesenchymal cell-cell interactions.