Lung branching morphogenesis depends on mesenchymal-epithelial tissue interactions. Keratinocyte growth factor (KGF) has been implicated to be a regulator of these tissue interactions. In the present study, we investigated the role of KGF in early rat lung organogenesis. Reverse transcriptase-polymerase chain reaction analysis revealed KGF mRNA expression in the mesenchymal component of the 13-day embryonic lung, while message for KGF receptor (KGFR) was expressed in the epithelium, confirming the paracrine nature of KGF/KGFR axis. Antisense KGF oligonucleotides inhibited DNA synthesis of embryonic lung explants. This inhibitory effect of antisense KGF was partially reversed by the addition of exogenous KGF. Recombinant KGF was mitogenic for 13-day isolated embryonic lung epithelial cells. Medium conditioned by 13-day lung mesenchymal cells also stimulated DNA synthesis of 13-day embryonic lung epithelial cells. This stimulatory effect was partially abrogated by a neutralizing KGF antibody. The number of terminal buds of lung explants cultured in the presence of antisense KGF oligonucleotides was significantly reduced compared to control explants. Exogenous KGF partially abrogated the inhibitory effect of antisense KGF on early lung branching. Sense or scrambled KGF oligonucleotides had no inhibitory effect on lung growth and branching. Addition of neutralizing KGF antibodies to the explants also reduced the degree of branching, while non-immune IgG and neutralizing acidic FGF antibodies had no effect. Explants incubated with antisense oligonucleotides targeted to the initiation site of translation of both the splice variants of the fibroblast growth factor receptor-2 (FGFR2) gene, KGFR and bek, exhibited a similar reduction in lung branching as observed with antisense KGF oligonucleotides. Antisense KGFR-specific oligonucleotides dramatically inhibited lung branching, while exposure of explants to antisense bek-specific oligonucleotides resulted in reduced branching albeit to a lesser degree than that observed with antisense KGFR-specific oligonucleotides. Neither sense nor scrambled KGFR-specific oligonucleotides had any effect on early lung branching. These results suggest that the KGF/KGFR system has a critical role in early lung organogenesis.