Fetal lung development occurs in four stages: embryonic, pseudoglandular, canalicular, and saccular/alveolar. During the embryonic stage, the lung begins as a ventral outpouching from the thoracic foregut by about 26 days. The caudal end of this pouch pinches off and separates from the foregut and divides into its first branch point by 33 days. Further branching occurs as the primitive bronchial tree begins to penetrate the mesenchymal tissue that will ultimately become the pulmonary interstitia.

Transition between the embryonic stage and the pseudoglandular stage occurs at around 6–7 weeks. In the pseudoglandular stage, which continues through about the 17th week, the bronchial tree progresses through a series of 15–20 divisions such that the bronchial tree is completed by the 16th week. The glycogen-rich cuboidal epithelium lining the airways begins the process of differentiation into mature pneumocytes in a proximal to distal direction. Meanwhile, the pulmonary arterial pathways develop in conjunction with the bronchial tree, whereas the venous system develops in a pattern that demarcates lung segments and subsegments.

The next stage, the canalicular stage, spans the period from about 16 weeks to about 25 weeks. It is this period that marks the transformation from a previable organ into one with the potential to function as a gas exchange organ. The key development is the appearance of acini, which are tufts of airways and alveoli that emanate from the terminal bronchioles. The epithelium further differentiates, and type II pneumocytes become distinguishable and begin to synthesize surfactant. The previously cuboidal epithelial cells become flattened and begin to have more lamellar bodies within their cytoplasm. The surfaces, which comprise the future air–blood barrier, begin to take shape as the crude vascular tree coursing through the mesenchyma becomes more intricate and more closely apposed to airway epithelium – the eventual site of gas exchange.

In the final saccular/alveolar stages, which begin around 24 weeks and continue well into childhood, the terminal airway saccules differentiate into alveoli. Alveolarization, which proceeds most rapidly after about 32 weeks, occurs through the formation of septae that divide the saccules into alveoli. These septae contain capillaries as well as collagen and elastin fibers. At term, there are between 50 and 150 million alveoli. Alveoli continue to form after birth up to age 8, when the adult number of 300 million alveoli is attained.

As the fetal lung develops anatomically, it is simultaneously maturing in terms of biochemical function. The primary biochemical activity within the mature lung is the production of surfactant. Surfactant is produced by the type II pneumocytes, stored in cytoplasmic lamellar bodies, and secreted into the alveoli where it decreases surface tension and prevents alveolar collapse. It is composed of about 10% protein, 8% neutral lipids such as cholesterol, and the remainder phospholipids. The proteinaceous portion of surfactant includes many nonspecific proteins as well as surfactant-specific proteins SP-A, SP-B, SP-C, and SP-D. SP-A and SP-D are host defense proteins that bind to micro-organisms and promote their elimination by macrophages. SP-B is necessary for the packaging of surfactant into lamellar bodies, and its absence is lethal. The role of SP-C is not clearly defined, but its absence results in progressive interstitial lung disease.

The phospholipid content of surfactant changes during the second half of pregnancy. The predominant active component of mature surfactant is lecithin or phosphatidylcholine. Other constituents include phosphatidylinositol, phosphatidylethanolamine, phosphatidylserine, phosphatidylglycerol (PG), and sphingomyelin. The changes in concentration of these components can be used to assess fetal pulmonary maturity. One important measure is the ratio of lecithin to sphingomyelin. Following about 24 weeks, both substances begin to increase in concentration, but there is more sphingomyelin than lecithin (L/S ratio less than 1). Lecithin begins to rise sharply in the third trimester such that lecithin and sphingomyelin have equivalent concentrations by around 31–32 weeks (L/S ratio equals 1). Lecithin production continues to increase, and its concentration becomes double that of sphingomyelin by about 34–36 weeks (L/S ratio greater than 2). Concurrent with changes in the L/S ratio is the appearance and rapid rise of PG after about 35 weeks. Both an L/S ratio greater than 2 and the presence of PG signify that the fetus is at low risk for the development of respiratory distress syndrome (RDS) after birth. Both these features of mature surfactant are used in clinical tests of fetal lung maturity, which will be discussed below.