Pulmonary alveoli, the lung's gas-exchange structures, are formed in part by subdivision (septation) of the saccules that constitute the gas-exchange region of the immature lung. Although little is known about the regulation of septation, relatively recent studies show: (1) all-trans retinoic acid (RA) treatment of newborn rats increases septation and prevents the inhibition of septation produced by treatment of newborn rats with dexamethasone, a glucocorticosteroid hormone; (2) treatment with RA of adult rats that have elastase-induced emphysema increases lung elastic recoil, induces the formation of alveoli, and increases volume-corrected alveolar surface area; and (3) in tight-skin mice, which have a genetic failure of septation, and in rats in which septation had previously been prevented by treatment with dexamethasone, treatment with RA partially rescues the failed septation. These findings raise the possibility that treatment with RA will induce the formation of alveoli in humans with pulmonary emphysema.