Hop is an unusual homeodomain protein that was first identified in the developing heart where it functions downstream of Nkx2.5 to modulate cardiac gene expression. Hop functions through interactions with histone deacetylase (HDAC) 2 to mediate repression of cardiac-specific genes, and recent studies show that HDAC activity and HDAC2 expression are decreased in people with chronic obstructive pulmonary disease. Here, we show that Hop is expressed in airway epithelium coincident with HDAC2, and expression is induced by the combination of dexamethasone and cAMP in parallel with induction of surfactant protein gene expression. Hop functions in the developing pulmonary airway, acting downstream of Nkx2.1 and GATA6, to negatively regulate surfactant protein expression. Loss of Hop expression in vivo results in defective type 2 pneumocyte development with increased surfactant production and disrupted alveolar formation. Thus Hop represents a novel regulator of pulmonary maturation that is induced by glucocorticoids to mediate functionally important HDAC-dependent negative feedback regulation.