The mammalian respiratory system, consisting of both trachea and lung, initiates from the foregut endoderm. The molecular program that instructs endodermal cells to adopt the respiratory fate is not fully understood. Here we show that conditional inactivation of β-Catenin (also termed Ctnnb1) in foregut endoderm leads to absence of both the trachea and lung due to a failure in maintaining the respiratory fate. In converse, conditional expression of an activated form of β-Catenin leads to expansion of Nkx2.1, an early marker for the trachea and lung, into adjacent endoderm including the stomach epithelium. Analyses of these mutants show that the loss or gain of trachea/lung progenitor identity is accompanied by an expansion or contraction of esophagus/stomach progenitor identity, respectively. Our findings reveal an early role for β-Catenin in the establishment of respiratory progenitors in mouse foregut endoderm.