In vitro studies have suggested that members of the GATA and Nkx transcription factor families physically interact, and synergistically activate pulmonary epithelial- and cardiac-gene promoters. However, the relevance of this synergy has not been demonstrated in vivo. We show that Gata6-Titf1 (Gata6-Nkx2.1) double heterozygous (G6-Nkx DH) embryos and mice have severe defects in pulmonary epithelial differentiation and distal airway development, as well as reduced phospholipid production. The defects in G6-Nkx DH embryos and mice are similar to those observed in human neonates with respiratory distress syndromes, including bronchopulmonary dysplasia, and differential gene expression analysis reveals essential developmental pathways requiring synergistic regulation by both Gata6 and Titf1 (Nkx2.1). These studies indicate that Gata6 and Nkx2.1 act in a synergistic manner to direct pulmonary epithelial differentiation and development in vivo, providing direct evidence that interactions between these two transcription factor families are crucial for the development of the tissues in which they are co-expressed.