Formation and orderly development of the mammalian lung results from a complex set of cell to cell and cell to matrix interactions following transcriptional regulation during pulmonary organogenesis. Transcriptional control of differentiation genes early on and epithelial-mesenchymal interactions mediated by growth factors later on, resulting in the formation of conducting airways and an extensive alveolar capillary interface, is critical for normal lung development. HNF-3β and TTF-1 are transcription factors that are involved in gene regulation and formation and differentiation of respiratory epithelium. Studies done in early mouse embryonic lung demonstrate that a variety of peptide growth factors and their receptors are expressed early on in lung development. Signalling through the FGFR2 is critical to normal development of the distal epithelium and mesenchyme. The inductive and permissive influences of growth factors on lung development has been demonstrated by gain or loss of function experiments in early embryonic mouse lung organ culture, in transgenic and in null mutant mice. VEGF present in airway epithelial cells is involved in the maturation as well as proliferation of capillary endothelial cells. Epithelial-endothelial interactions during lung development are important in establishing a functional blood gas interface. Epithelial-mesenchymal interactions mediated by growth factors are also important in the restoration of normal alveolar architecture after lung injury. Further understanding of the role of these growth factors and their cellular interactions in bronchopulmonary dysplasia and in tissue repair following lung injury, may lead to development of better therapeutic modalities in treating these disorders.