Epithelial cells lining the peripheral lung synthesize pulmonary surfactant that reduces surface tension at the air-liquid interface. Lack of surfactant lipids and proteins in the lungs causes respiratory distress syndrome, a common cause of morbidity and mortality in preterm infants. We show that C/EBPalpha plays a crucial role in the maturation of the respiratory epithelium in late gestation, being required for the production of surfactant lipids and proteins necessary for lung function. Deletion of the Cebpa gene in respiratory epithelial cells in fetal mice caused respiratory failure at birth. Structural and biochemical maturation of the lung was delayed. Normal synthesis of surfactant lipids and proteins, including SP-A, SP-B, SP-C, SP-D, ABCA3 (a lamellar body associated protein) and FAS (precursor of fatty acid synthesis) were dependent upon expression of the C/EBPalpha in respiratory epithelial cells. Deletion of the Cebpa gene caused increased expression of Tgfb2, a growth factor that inhibits lung epithelial cell proliferation and differentiation. Normal expression of C/EBPalpha required Titf1 and Foxa2, transcription factors that also play an important role in perinatal lung differentiation. C/EBPalpha participates in a transcriptional network that is required for the regulation of genes mediating perinatal lung maturation and surfactant homeostasis that is necessary for adaptation to air breathing at birth.