Neovascularization is crucial to lung development and is mediated through a variety of angiogenic and anti-angiogenic factors. Herein, we show that excess Endothelial Monocyte Activating Polypeptide (EMAP) II, an anti-angiogenic protein, not only inhibits fetal lung neovascularization, but also significantly alters airway epithelial morphogenesis. In a murine allograft model of lung neovascularization and morphogenesis, embryonic lungs transplanted under the skin of immunocompromised mice receiving intraperitoneal EMAP II, had a 56% reduction in vessel density (P<0.0001) compared to control. EMAP II treated lung transplants also exhibited a marked alteration in lung morphogenesis, including lack of type II alveolar cell formation, determined by markedly decreased expression of surfactant protein C, and increased apoptosis. In contrast, lung implants in animals receiving an EMAP II blocking antibody had an increase in vessel density of 50% (P<0.0001) and increased expression of surfactant protein C mRNA in distal epithelium. These studies demonstrate that EMAP II negatively modulates lung neovascularization as well as leading to the arrest of lung airway epithelial morphogenesis and apoptosis.