Lung mesenchyme is a critical determinant of the shape and size of the lung, the extent and patterning of epithelial branching, and the formation of the pulmonary vasculature and interstitial mesenchymal components of the adult lung. Fibroblast growth factor 9 (FGF9) is a critical regulator of lung mesenchymal growth; however, upstream mechanisms that modulate the FGF mesenchymal signal and the downstream targets of mesenchymal FGF signaling are poorly understood. Here we have identified a robust regulatory network in which mesenchymal FGF signaling regulates beta-Catenin mediated WNT signaling in lung mesenchyme. By conditionally inactivating beta-Catenin in lung mesenchyme, we show that mesenchymal WNT-beta-Catenin signaling is essential for lung development and acts to regulate the cell cycle G1 to S transition and the FGF responsiveness of mesenchyme. Together, both FGF and WNT signaling pathways function to sustain mesenchymal growth and coordinate epithelial morphogenesis during the pseudoglandular stage of lung development.