Peroxisome proliferator‐activated receptor (PPAR)‐γ is a member of the nuclear hormone receptor superfamily that can promote cellular differentiation and organ development. PPARγ expression has been reported in a number of pulmonary cell types, including inflammatory, mesenchymal, and epithelial cells. We find that PPARγ is prominently expressed in the airway epithelium in the mouse lung. In an effort to define the physiological role of PPARγ within the lung, we have ablated PPARγ using a novel line of mice capable of specifically targeting the airway epithelium. Airway epithelial cell PPARγ‐targeted mice display enlarged airspaces resulting from insufficient postnatal lung maturation. The increase in airspace size is accompanied by alterations in lung physiology, including increased lung volumes and decreased tissue resistance. Genome‐wide expression profiling reveals a reduction in structural extracellular matrix (ECM) gene expression in conditionally targeted mice, suggesting a disruption in epithelial‐mesenchymal interactions necessary for the establishment of normal lung structure. Expression profiling of airway epithelial cells isolated from conditionally targeted mice indicates PPARγ regulates genes encoding known PPARγ targets, additional lipid metabolism enzymes, and markers of cellular differentiation. These data reveal airway epithelial cell PPARγ is necessary for normal lung structure and function.—Simon, D. M., Arikan, M. C., Srisuma, S., Bhattacharya, S., Tsai, L. W., Ingenito, E. P., Gonzalez, F., Shapiro, S. D., and Mariani, T. J. Epithelial cell PPARγ contributes to normal lung maturation. FASEB J. 20, E710–E720 (2006)