Alveolar capillary dysplasia with misalignment of pulmonary veins (ACD/MPV) is a rare, neonatally lethal developmental disorder of the lung with defining histologic abnormalities typically associated with multiple congenital anomalies (MCA). Using array CGH analysis, we have identified six overlapping microdeletions encompassing the FOX transcription factor gene cluster in chromosome 16q24.1q24.2 in patients with ACD/MPV and MCA. Subsequently, we have identified four different heterozygous mutations (frameshift, nonsense, and no-stop) in the candidate FOXF1 gene in unrelated patients with sporadic ACD/MPV and MCA. Custom-designed, high-resolution microarray analysis of additional ACD/MPV samples revealed one microdeletion harboring FOXF1 and two distinct microdeletions upstream of FOXF1, implicating a position effect. DNA sequence analysis revealed that in six of nine deletions, both breakpoints occurred in the portions of Alu elements showing eight to 43 base pairs of perfect microhomology, suggesting replication error Microhomology-Mediated Break-Induced Replication (MMBIR)/Fork Stalling and Template Switching (FoSTeS) as a mechanism of their formation. In contrast to the association of point mutations in FOXF1 with bowel malrotation, microdeletions of FOXF1 were associated with hypoplastic left heart syndrome and gastrointestinal atresias, probably due to haploinsufficiency for the neighboring FOXC2 and FOXL1 genes. These differences reveal the phenotypic consequences of gene alterations in cis.