Elastin is a major component of the mammalian lung, predominantly found in the alveoli. Destruction of alveolar elastic fibers is implicated in the pathogenic mechanism of emphysema in adults. These data define a role for elastin in the structure and function of the mature lung, and suggest that elastin is important for alveogenesis. To investigate the role of elastin in lung development, we examined mice lacking elastin (Eln-/-). At birth, the distal air sacs of Eln-/- lungs dilate to form abnormally large cavities. This phenotype appears before the synthesis and deposition of alveolar elastin, a process mediated by myofibroblasts and initiated after postnatal Day 4. Morphometric analyses demonstrate that the perinatal development of terminal airway branches is arrested in Eln-/- mice. The branching defect is accompanied by fewer distal air sacs that are dilated with attenuated tissue septae, a condition reminiscent of emphysema. Elastin expression in the lung parenchyma before alveogenesis is localized to the mesenchyme surrounding the developing airways, supporting a role for elastin in airway branching. Thus, in addition to its role in the structure and function of the mature lung, elastin is essential for pulmonary development and is important for terminal airway branching.