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Neonatal respiratory function depends on the development of a well-formed pulmonary capillary bed. Vascular endothelial growth factor (VEGF) is a potent inducer of endothelial cell growth and angiogenesis. High levels of VEGF protein and messenger RNA (mRNA) have been detected in the developing lung, suggesting that VEGF plays a role in the development of the pulmonary capillary bed. To begin to understand the role of VEGF in human lung development, we explored the regulation of VEGF gene expression and the localization of VEGF protein and mRNA in a model of the developing human lung. VEGF protein and mRNA were detected in midtrimester human fetal lung tissue, and their levels increased with time in explant culture. VEGF protein and mRNA were increased by the maintenance of human fetal lung explants in 2% O2 environments compared with 20% O2 environments. VEGF mRNA levels were found to be increased by cyclic adenosine monophosphate (cAMP) in explants that were incubated in 20% O2, but not in those incubated in 2% O2. Immunostaining for VEGF protein demonstrated localization primarily in airway epithelial cells in midtrimester human fetal lung tissue. Immunostaining for VEGF increased with incubation of human fetal lung explants in 2% and 20% O2. Interestingly, VEGF protein was localized primarily in the basement membrane subjacent to airway epithelial cells after 4 d of incubation in 20% O2. Incubation of tissues in the presence of dibutyryl cAMP resulted in an increase in immunostaining for VEGF, primarily in the basement membranes of prealveolar ducts in 20% O2-treated tissues. In situ hybridization studies indicated that VEGF mRNA was present in both mesenchymal cells and airway epithelial cells. These data suggest that VEGF gene expression is regulated by both oxygen and cAMP in the developing human lung. The detection of VEGF mRNA and protein in distal airway epithelial cells and the detection of VEGF protein in the basement membrane subjacent to the airway epithelial cells suggest that translocation of VEGF protein occurs after its synthesis in the epithelium. Localization of VEGF to the basement membrane of airway epithelial cells may be important for directing capillary development in the human lung.