The lung develops from the endoderm through a process of branching morphogenesis. This process is highly active during the pseudoglandular stage of lung development and continues into the canalicular stage, resulting in the formation of terminal sacs. CCAAT/enhancer binding proteins (C/EBPs) are transcription factors regulating central aspects of differentiation and proliferation. We report here the developmental expression of C/EBP, and in lung. C/EBP exhibits a dynamic expression pattern and is first detected during late pseudoglandular stage. At this stage, expression is observed in a subset of epithelial cells in the distal parts of the branching tubules. Expression of C/EBP is confined to non-proliferating cells. To examine the role of C/EBP in lung development we generated transgenic mice ectopically expressing C/EBP in the lung epithelium using the human surfactant protein-C promoter. Lungs from these mice were of normal size but exhibited a phenotype characterized by fewer and larger developing epithelial tubules, indicating that the branching process was affected. No effects on overall proliferation or cellular differentiation were observed. When this phenotype was compared to that of mice carrying a targeted mutation of the Cebpa gene, the Cebpa^-/- mice exhibited a similar developmental phenotype. In conclusion, our results show a role for C/EBP in lung development and suggest a function in the later stages of lung branching morphogenesis.