Fgf-10-deficient mice (Fgf-10(-/-)) were generated to determine the role(s) of Fgf-10 in vertebrate development. Limb bud initiation was abolished in Fgf-10(-/-) mice. Strikingly, Fgf-10(-/-) fetuses continued to develop until birth, despite the complete absence of both fore- and hindlimbs. Fgf-10 is necessary for apical ectodermal ridge (AER) formation and acts epistatically upstream of Fgf-8, the earliest known AER marker in mice. Fgf-10(-/-) mice exhibited perinatal lethality associated with complete absence of lungs. Although tracheal development was normal, main-stem bronchial formation, as well as all subsequent pulmonary branching morphogenesis, was completely disrupted. The pulmonary phenotype of Fgf-10(-/-) mice is strikingly similar to that of the Drosophila mutant branchless, an Fgf homolog.