The airways are lined by several distinct epithelial cells that play unique roles in pulmonary homeostasis; however, the mechanisms controlling their differentiation in health and disease are poorly understood. The winged helix transcription factor, FOXA2, is expressed in the foregut endoderm and in subsets of respiratory epithelial cells in the fetal and adult lung. Because targeted mutagenesis of the Foxa2 gene in mice is lethal before formation of the lung, its potential role in lung morphogenesis and homeostasis has not been determined. We selectively deleted Foxa2 in respiratory epithelial cells in the developing mouse lung. Airspace enlargement, goblet cell hyperplasia, increased mucin and neutrophilic infiltration were observed in lungs of the Foxa2-deleted mice. Experimental goblet cell hyperplasia caused by ovalbumin sensitization,interleukin 4 (IL4), IL13 and targeted deletion of the gene encoding surfactant protein C (SP-C), was associated with either absent or decreased expression of Foxa2 in airway epithelial cells. Analysis of lung tissue from patients with a variety of pulmonary diseases revealed a strong inverse correlation between FOXA2 and goblet cell hyperplasia. FOXA2 is required for alveolarization and regulates airway epithelial cell differentiation in the postnatal lung.