PDGF isoforms are a family of polypeptides that bind to cell surface receptors and induce fibroblast proliferation and chemotaxis. PDGF-A and -B chain isoforms have previously been shown to be involved in murine lung development. A new PDGF polypeptide, PDGF-C, was recently recognized and differs from the PDGF-A and -B isoforms in that it requires proteolytic cleavage before it can bind and activate the PDGF alpha receptor. In these studies PDGF-C was over-expressed during embryogenesis using the lung specific surfactant protein C promoter. PDGF-C transgenic pups died from respiratory insufficiency within minutes following birth. At E18.5, nontransgenic lungs exhibited lung morphology consistent with the saccular stage of lung development. In contrast, E18.5 transgenic lungs retained many features of the canalicular stage of lung development and had abundant numbers of large poorly differentiated mesenchymal cells. These results suggest that PDGF-C is activated during lung development and is a potent growth factor for mesenchymal cells in vivo.