Organized and coordinated lung development follows transcriptional regulation of a complex set of cell-cell and cell-matrix interactions resulting in a blood-gas interface ready for physiologic gas exchange at birth. Transcription factors, growth factors, and various other signaling molecules regulate epithelial-mesenchymal interactions by paracrine and autocrine mechanisms. Transcriptional control at the earliest stages of lung development results in cell differentiation and cell commitment in the primitive lung bud, in essence setting up a framework for pattern formation and branching morphogenesis. Branching morphogenesis results in the formation of the conductive airway system, which is critical for alveolization. Lung development is influenced at all stages by spatial and temporal distribution of various signaling molecules and their receptors and also by the positive and negative control of signaling by paracrine, autocrine, and endocrine mechanisms. Lung bud formation, cell differentiation, and its interaction with the splanchnic mesoderm are regulated by HNF-3β, Shh, Nkx2.1, HNF-3/Forkhead homolog-8 (HFH-8), Gli, and GATA transcription factors. HNF-3β regulates Nkx2.1, a transcription factor critical to the formation of distal pulmonary structures. Nkx2.1 regulates surfactant protein genes that are important for the development of alveolar stability at birth. Shh, produced by the foregut endoderm, regulates lung morphogenesis signaling through Gli genes expressed in the mesenchyme. FGF10, produced by the mesoderm, regulates branching morphogenesis via its receptors on the lung epithelium. Alveolization and formation of the capillary network are influenced by various factors that include PDGF, vascular endothelial growth factor (VEGF), and retinoic acid. Epithelial-endothelial interactions during lung development are important in establishing a functional blood-gas interface. The effects of various growth factors on lung development have been demonstrated by gain- or loss-of-function studies in null mutant and transgenic mice models. Understanding the role of growth factors and various other signaling molecules and their cellular interactions in lung development will provide us with new insights into the pathogenesis of bronchopulmonary dysplasia and disorders of lung morphogenesis.