Fibroblast growth factor (FGF) signaling has been shown to be essential for many aspects of normal lung development. To determine epithelial targets of FGF signaling, we cultured embryonic day (E) 11.5 mouse lungs for 24 hr in the presence or absence of the FGF receptor antagonist SU5402, which inhibited branching morphogenesis. Affymetrix gene chip analysis of treated and control epithelia identified several genes regulated by FGF signaling, including Elf5, a member of the Epithelial‐specific Ets family of transcription factors. SU5402 reduced Elf5 expression in mesenchyme‐free cultures of E12.5 epithelium, demonstrating that the inhibition was direct. In situ hybridization revealed that Elf5 had a dynamic pattern of expression during lung development. We found that expression of Elf5 was induced by FGF7 and FGF10, ligands that primarily bind FGFR2b. To further define the pathways by which FGFs activate Elf5 expression, we cultured E11.5 lung tips in the presence of compounds to inhibit FGF receptors (SU5402), PI3‐Kinase/Akt–mediated signaling (LY294002), and MAP Kinase/Erk‐mediated signaling (U0126). We found that SU5402 and LY294002 significantly reduced Elf5 expression, whereas U0126 had no effect. LY294002 also reduced Elf5 expression in cultures of purified epithelium. Finally, pAkt was coexpressed with Elf5 in the proximal epithelial airways of E17.5 lungs. These results demonstrate that Elf5 is an FGF‐sensitive transcription factor in the lung with a dynamic pattern of expression and that FGF regulation of Elf5 by means of FGFR2b occurs through the PI3‐Kinase/Akt pathway. Developmental Dynamics 236:1175–1192, 2007. © 2007 Wiley‐Liss, Inc.