Although it is well established that the nonciliated bronchiolar epithelial (Clara) cell serves as the progenitor for itself and ciliated cells in the adult lung following bronchiolar epithelial injury, the nature of this relationship during development has not been well characterized. To define the pattern of proliferation and differentiation of bronchiolar ciliated and nonciliated cells, lungs of fetuses and offspring from time-mated New Zealand White rabbits, ranging in age from 24 days of gestation to 25 wk postnatal (PN), were fixed by airway infusion and embedded for simultaneous light and transmission electron microscopy. Three categories of cells could be distinguished in terminal bronchioles: nonciliated cells with abundant glycogen and variable numbers of organelles; nonciliated cells with little glycogen, large numbers of polyribosomes, and variable numbers of basal bodies; and ciliated cells with cilia of varying height. Together, both types of nonciliated cells were 100% of the epithelium at 24 and 27 days gestation age (DGA). At 30 days DGA, they were 85% of the population; at all postnatal ages, they ranged from 75 to 81% of the total population. Nonciliated cells with polyribosomes and basal bodies were 10 to 20% of the total nonciliated cell population between 24 DGA and 1 wk PN and not found thereafter. Ciliated cells were not observed in animals younger than 30 DGA. Labeling indices of bronchiolar epithelium in fetuses of pregnant rabbits injected with tritiated thymidine, as determined by autoradiography, were 57 cells per thousand at 28 DGA (1 h postinjection [PI]), 76 at 29 DGA (24 h PI), and 114 at 30 DGA (48 h PI).(ABSTRACT TRUNCATED AT 250 WORDS)