The lungs serve the primary function of air-blood gas exchange in all mammals and in terrestrial vertebrates. Efficient gas exchange requires a large surface area that provides intimate contact between the atmosphere and the circulatory system. To achieve this, the lung contains a branched conducting system (the bronchial tree) and specialized air-blood gas exchange units (the alveoli). The conducting system brings air from the external environment to the alveoli and functions to protect the lung from debris that could obstruct airways, from entry of pathogens, and from excessive loss of fluids. The distal lung enables efficient exchange of gas between the alveoli and the conducting system and between the alveoli and the circulatory system. In this article,we highlight developmental and physiological mechanisms that specify, pattern, and regulate morphogenesis of this complex and essential organ. Recent advances have begun to define molecular mechanisms that control many of the important processes required for lung organogenesis; however, many questions remain. A deeper understanding of these molecular mechanisms will aid in the diagnosis and treatment of congenital lung disease and in the development of strategies to enhance the reparative response of the lung to injury and eventually permit regeneration of functional lung tissue.