Although alveolar wall thinning has been attributed to apoptosis of interstitial lung lipofibroblasts (LFs), the underlying molecular mechanism(s) remains unknown. While the physiologic vitamin D steroid hormone 1,25(OH)₂D₃ (1,25D) has been suggested as a local paracrine/autocrine effector of fetal lung maturation and is known to affect fibroblast apoptosis, its effects on LF apoptosis are unknown. We determined the role of 1,25D and its metabolite 3-epi-1,25D on LF and alveolar type II (ATII) cell differentiation, proliferation, and apoptosis. Embryonic day 19 Sprague Dawley fetal rat lung LFs and ATII cells were treated with 1,25D or 3-epi-1,25D (1x10-¹⁰ to 1x10-⁸M) for 24h and cell proliferation, apoptosis, and differentiation were assessed. Both 1,25D and 3-epi-1,25D exhibited dose-dependent increases in expression of the key homeostatic epithelial-mesenchymal differentiation markers, increased LF and ATII cell proliferation, and decreased apoptosis. Furthermore, rat pups administered 1,25D from postnatal day 0 to 14 days showed increased expressions of key LF and ATII cell differentiation markers, increased BcL2/Bax ratio as an index of decreased spontaneous alveolar LF and ATII cell apoptosis, increased alveolar count, and a paradoxical increase in septal thickness. We conclude that spatial- and temporal-specific actions of vitamin D play a critical role in perinatal lung maturation by stimulating key alveolar epithelial-mesenchymal interactions and by modulating LF proliferation/apoptosis. These data not only provide the biological rationale for the presence of an alveolar vitamin D paracrine system, but also provide the first integrated molecular mechanism for increased surfactant synthesis and alveolar septal thinning during perinatal lung maturation.