The airway epithelium of human and animal lungs contains highly specialized pulmonary neuroendocrine cells (PNEC), distributed as solitary cells and as innervated clusters, neuroepithelial bodies (NEB). The designation "PNEC system" stems from the expression of both neural and endocrine cell phenotypes, including the synthesis and release of amine (serotonin, 5-HT) and a variety of neuropeptides (that is, bombesin). The role and function of PNEC in the lung have remained a subject of speculation for many years. During the last decade, studies using modern techniques of cellular and molecular biology revealed a complex functional role for PNEC, beginning during the early stages of lung development as modulators of fetal lung growth and differentiation and at the time of birth as airway O2 sensors involved in neonatal adaptation. Postnatally and beyond, PNEC/NEB are providers of a lung stem cell niche that is important in airway epithelial regeneration and lung carcinogenesis. The focus of this review is to present and discuss recent findings pertaining to the responses of PNEC to intrauterine environmental stimuli, ontogeny and molecular regulation of PNEC differentiation, innervation of NEB, and their role as airway chemoreceptors, including mechanisms of O2 sensing and chemotransmission of hypoxia stimulus. Abnormalities of PNEC/NEB have been reported in a variety of pediatric pulmonary disorders but the clinical significance or the mechanisms involved are unknown. The discussion on the possible role of PNEC/NEB in the pathogenesis and pathobiology of pediatric lung diseases includes congenital lung disorders, bronchopulmonary dysplasia, disorders of respiratory control, neuroendocrine hyperplasia of infancy, cystic fibrosis, bronchial asthma, and pulmonary hypertension.