Mesenchymal factors are important in organ growth and differentiation and may affect epithelial function in the developing lung. In the present study, the role of epithelial-mesenchymal interactions in rat lung development is investigated by serial quantitative analysis of pulmonary ultrastructure. Because of sex-related differences in fetal pulmonary maturity, the formation of intercellular contacts is compared in male and female littermates grouped according to sex from day 17 to 22 of gestation. It was found that, as full term approached, continuity of the basement membrane under cuboidal epithelial cells decreased, the number of foot processes on these cells increased, and the percentage of processes that penetrated the basement membrane also increased. These changes occurred more rapidly in female animals. Intercellular contacts between epithelial and interstitial cells became more frequent with time and were observed more often in females at days 19 and 20. The incidence of cuboidal epithelial cells containing lamellar bodies was greater in females at day 20. No sex-related differences were found at day 22 in any parameter studied. The results demonstrate a correlation between the increasing frequency of epithelial-mesenchymal cell contacts and the onset of epithelial differentiation. Since these events occur earlier in females, it is postulated that androgen levels are important in regulating epithelial growth and differentiation in the developing lung.