The respiratory system has two basic functions: air exchange and pathogen clearance. The conducting airway and alveolar parenchyma are the basic structures to fulfill these functions during respiratory cycles. In humans, there are approximately 40 cell types in the lung that coordinately work together through various structural and signaling molecules. These molecules are vital for maintaining normal lung functions in response to environmental changes. Aberrant expression of these molecules can jeopardize human health and cause various pulmonary diseases. In this article, we will review some recent progress made in the pulmonary field, using genetic animal model systems to elucidate molecular mechanisms that are important for alveolar formation and lung diseases.