Bone morphogenetic protein (BMP) 4 plays very important roles in regulating developmental processes of many organs, including lung. Smad1 is one of the BMP receptor downstream signaling proteins that transduce BMP4 ligand signaling from cell surface to nucleus. The dynamic expression patterns of Smad1 in embryonic mouse lungs were examined using immunohistochemistry. Smad1 protein was predominantly detected in peripheral airway epithelial cells of early embryonic lung tissue [embryonic day 12.5 (E12.5)], whereas Smad1 protein expression in mesenchymal cells increased during mid-late gestation. Many Smad1-positive mesenchymal cells were localized adjacent to large airway epithelial cells and endothelial cells of blood vessels, which colocalized with a molecular marker of smooth muscle cells (alpha-smooth muscle actin). The biological function of Smad1 in early lung branching morphogenesis was then studied in our established E11.5 lung explant culture model. Reduction of endogenous Smad1 expression was achieved by adding a Smad1-specific antisense DNA oligonucleotide, causing approximately 20% reduction of lung epithelial branching. Furthermore, airway epithelial cell proliferation and differentiation were also inhibited when endogenous Smad1 expression was knocked down. Therefore, these data indicate that Smad1, acting as an intracellular BMP signaling pathway component, positively regulates early mouse embryonic lung branching morphogenesis.