The transition to air breathing after birth requires both anatomic and biochemical maturation of the lung. Lung morphogenesis is mediated by complex paracrine interactions between respiratory epithelial cells and mesenchymal cells that direct transcriptional programs guiding patterning and cytodifferentiation of the lung. In the present study, transgenic mice were generated in which the Kruppel-like factor 5 gene (Klf5) was conditionally deleted in respiratory epithelial cells in the fetal lung. Lack of KLF5 inhibited maturation of the lung during the saccular stage of development. Klf5^Δ/Δ mice died of respiratory distress immediately after birth. Abnormalities in lung maturation and morphogenesis were observed in the respiratory epithelium, the bronchiolar smooth muscle, and the pulmonary vasculature. Respiratory epithelial cells of both the conducting and peripheral airways were immature. Surfactant phospholipids were decreased and lamellar bodies, the storage form of surfactant, were rarely found. mRNA microarray analysis demonstrated that KLF5 influenced the expression of genes regulating surfactant lipid and protein homeostasis, vasculogenesis, including Vegfa, and smooth muscle cell differentiation. KLF5 regulates genes controlling paracrine interactions during lung morphogenesis, as well as those regulating the maturation of the respiratory epithelium that is required for lung function after birth.