The role of glucocorticoids in the regulation of vitamin K-dependent carboxylase activity was investigated in fetal and adult lung. Glucocorticoid deficiency induced by adrenalectomy (ADX) stimulated adult lung growth and reduced carboxylation in a tissue-specific manner. Type II epithelial cells were enriched in carboxylase activity, where ADX-induced down-regulation was retained in freshly isolated cells. Carboxylase activity in fetal type II cells was half that found in fetal fibroblasts isolated from the same lungs, and both populations increased activity with time in culture. Both carboxylase activity and formation of Gla-containing proteins was stimulated by dexamethasone (Dex) in fetal type II cells. Matrix Gla protein (MGP), a vitamin K-dependent protein known to be synthesized in type II cells, was also found in fetal fibroblasts, where its expression was stimulated by Dex. These combined results suggested an important role for glucocorticoids and MGP in the developing lung, where both epithelial and mesenchymal cells coordinate precise control of branching morphogenesis. We investigated MGP expression and its regulation by Dex in the fetal lung explant model. MGP mRNA and protein were increased in parallel with the formation of highly branched lungs, and this increase was stimulated two-fold by Dex at each day of culture. Dex-treated explants were characterized by large, dilated conducting airways and a peripheral rim of highly-branched saccules compared to uniformly branched controls. We propose that glucocorticoids are important regulators of vitamin K function in the developing and adult lung.