We have reported that dexamethasone (DEX) treatment of early embryonic rat lungs in culture induced features of both distorted and accelerated maturation. In this report, we investigated the effects of retinoids on normal and DEX-induced lung development in vitro. Lung maturation was assessed by examining the morphology and the expression of genes related to epithelial differentiation (surfactant proteins, SP-A, SP-B and SP-C and Clara cell protein, CC10) and growth [keratinocyte growth factor (KGF) and hepatocyte growth factor (HGF)]. We cultured d 14 and 15 fetal rat lungs in the presence of DEX (1-1000 nM) and/or all-trans-retinoic acid (RA)(10-7-10-5 M) for 4 d. RA at 10-6 and 10-5 M inhibited branching and dilated the distal tubules, and at 10-5 M caused dilatation of the proximal tubules destined to form the trachea and the main bronchi. The adverse effects of DEX, such as distorted branching, tubular dilatation, and suppression of both lung growth and epithelial cell proliferation, were all prevented by RA. In addition, RA inhibited several features of DEX-induced accelerated maturation, such as: 1) the increased levels of SP-A, SP-B, and CC10 mRNAs; 2) the attenuation of mesenchymal tissue; and 3) the mature distribution of cells expressing SP-C mRNA. In contrast, RA potentiated the increase of KGF and decrease of HGF transcripts induced by DEX. In conclusion, the study shows antagonism by RA of DEX-induced effects on lung morphology and gene expression. We postulate that normal lung development requires a balanced action of endogenous retinoids and glucocorticoids.