Transgenic mice expressing platelet-derived growth factor A chain (PDGF-A) in the distal lung epithelium from the surfactant protein C (SPC) promoter were generated to investigate the role of this growth factor in lung development. Expression of the SPC-PDGFA transgene resulted in an enlarged, nonfunctional lung and perinatal lethality caused by failure to initiate ventilation. Histologic analysis of embryonic day (E) 16.5 lungs revealed increased mesenchymal cells and acinar buds and decreased bronchioles and dilated airspaces in SPC-PDGFA transgenic mice. At E18.5, nontransgenic lungs exhibited lung morphology typical of the saccular stage of lung development, including dilated airspaces, thin respiratory epithelium and mesenchyme, and elastin fiber deposition in primary septa. In contrast, E18.5 transgenic lungs retained many features of the canalicular stage of lung development, including undilated airspaces, cuboidal respiratory epithelium, thickened mesenchyme, and lack of parenchymal elastin deposition. These results indicate that PDGF-A is a potent growth factor for mesenchymal cells in the developing lung and that the downregulation of PDGF-A expression that normally occurs in the lung during late gestation is required for transition from the canalicular to the saccular stage of lung development.