Connective tissue growth factor (CTGF) is a mediator of growth factor activity, and Ctgf knockouts die at birth from respiratory failure due to skeletal dysplasia. Previous microarray analysis revealed Ctgf down-regulation in the hypoplastic lungs of amyogenic mouse embryos. This study, therefore, examined pulmonary development in Ctgf-/- mouse fetuses to investigate if respiration could also have been impaired by lung abnormalities. The Ctgf-/- lungs were hypoplastic, with reduced cell proliferation and increased apoptosis. PDGF-B, its receptor and IGF-I, were markedly attenuated and the TTF-1 gradient lost. Type II pneumocyte differentiation was perturbed, the cells depicting excessive glycogen retention and diminished lamellar body and nuclear size, though able to synthesize surfactant-associated protein. However, type I pneumocyte differentiation was not affected by Ctgf deletion. Our findings indicate that the absence of Ctgf and/or its protein product, CTGF, may induce pulmonary hypoplasia by both disrupting basic lung developmental processes and restricting thoracic expansion.