Interactions between the pulmonary epithelium and its surrounding mesenchyme are critical for regulating developmental processes during early lung development. However, less is known about the importance of these tissue interactions during late lung development. In this study we employed a novel cell recombination model to examine the role of epithelial-mesenchymal interactions in both lung epithelial morphogenesis and cellular differentiation during late fetal gestation. Results suggest that at late fetal gestation, lung epithelial cells are not fully committed to a specific phenotype and still have the plasticity to respond to various signals originating from the surrounding mesenchyme. We have also begun to investigate a potential role for the Notch signaling pathway in mammalian lung development. The Notch pathway is an evolutionarily conserved mechanism for regulating cell differentiation in populations of equipotent cells. Since there must be mechanisms which control the specification of lung epithelial cell fate during lung development, we analyzed the spatial and temporal mRNA expression patterns of some of the Notch receptors, ligands and various pathway mediators, by non-radioactive 'in situ' hybridization. (Abstract shortened by UMI.).