The vertebrate lung consists of multiple cell types that are derived primarily from endodermal and mesodermal compartments of the early embryo. The process of pulmonary organogenesis requires the generation of precise signaling centers that are linked to transcriptional programs that, in turn, regulate cell numbers, differentiation, and behavior, as branching morphogenesis and alveolarization proceed. This review summarizes knowledge regarding the expression and proposed roles of transcription factors influencing lung formation and function with particular focus on knowledge derived from the study of the mouse. A group of transcription factors active in the endodermally derived cells of the developing lung tubules, including thyroid transcription factor-1 (TTF-1), beta-catenin, Forkhead orthologs (FOX), GATA, SOX, and ETS family members are required for normal lung morphogenesis and function. In contrast, a group of distinct proteins, including FOXF1, POD1, GLI, and HOX family members, play important roles in the developing lung mesenchyme, from which pulmonary vessels and bronchial smooth muscle develop. Lung formation is dependent on reciprocal signaling among cells of both endodermal and mesenchymal compartments that instruct transcriptional processes mediating lung formation and adaptation to breathing after birth.