Transgenic animals bearing a chimeric gene containing 5′-flanking regions of the human surfactant protein C (SPC) gene ligated to the bacterial chloramphenicol acetyltransferase (CAT) gene were analyzed by in situ hybridization histochemistry to determine the temporal and spatial distribution of transgene expression during organogenesis of the murine lung. Ontogenic expression of the SP-C-CAT gene was compared to that of the endogenous SP-C gene and to the Clara cell CC₁₀ gene. High levels of SP-C-CAT expression were observed as early as Day 10 of gestation in epithelial cells of the primordial lung buds. Low levels of endogenous SP-C mRNA were detected a day later, but only in the more distal epithelial cells of the newly formed, primitive, lobar bronchi. On Gestational Days 13 through 16, transcripts for both the endogenous and chimeric gene were restricted to distal epithelial elements of the branching bronchial tubules and were no longer detected in the more proximal regions of the bronchial tree. Although high levels of SP-C-CAT expression were maintained throughout organogenesis, endogenous SP-C expression increased dramatically on Gestational Day 15, coincident with acinar tubule differentiation at the lung periphery. Low levels of endogenous CC₁₀, expression were detected by Gestational Day 16 in both lobar and segmental bronchi. By the time of birth, CC₁₀ transcripts were expressed at high levels in the trachea and at all levels of the bronchial tree; endogenous SP-C mRNA was restricted to epithelial cells of the terminal alveolar saccules; and SP-C-CAT expression was now detected in both alveolar and bronchiolar epithelial cells. These results indicate that (1) cis -acting regulatory elements of the human SP-C gene can direct high levels of foreign gene expression to epithelial cells of the embryonic mouse long; (2) expression of the human SP-C-CAT chimeric gene is developmentally regulated, exhibiting a morphogenic expression pattern similar, but not identical, to that of the endogenous murine SP-C gene; (3) the embryonic expression of endogenous SP-C and chimeric SP-C-CAT transcripts identifies progenitor cells of the distal respiratory epithelium; and (4) differentiation of bronchial epithelium is coincident with loss of SP-C expression and subsequent acquisition of CC₁₀, expression in proximal regions of the developing bronchial tubules.