Secreted glycoproteins serve a variety of functions related to cell-cell communication in developmental systems. We cloned LGL1, a novel glucocorticoid-inducible gene in foetal lung, and described its temporal and spatial localization in the rat. Disruption of foetal mesenchyme-specific LGL1 expression using antisense oligodeoxynucleotides, which was associated with a 50% decrease in lgl1 protein levels, inhibited airway epithelial branching in foetal rat gestational day 13 lung buds in explant culture. These findings suggested that lgl1 functions as a secreted signalling molecule. We now provide evidence supporting a role for lgl1 in mesenchymal-epithelial interactions that govern lung organogenesis. Lgl1 is a secreted glycoprotein with a conserved N-terminal secretory signal peptide. Using dual immunofluorescence, intracellular lgl1 was found to co-localize with markers of the Golgi apparatus and endoplasmic reticulum, consistent with its association with secretory vesicles. Using pulse-chase studies, we show that lgl1 is a stable protein with a half-life of 11.5 h. Furthermore, at gestational days 20 and 21 (term=22), foetal distal lung epithelial cells import lgl1 protein. Taken together, our findings support distinct roles for lgl1 as a mediator of glucocorticoid-induced mesenchymal-epithelial interactions in early and late foetal lung organogenesis.