Lung buds isolated from 11.5 days post coitum mouse embryos survive and undergo branching morphogenesis in culture. This organ culture system was used to examine the role of TGF beta 1 and N-myc expression in lung branching morphogenesis. By 24 hours, TGF beta 1 reversibly inhibited branching morphogenesis in a concentration-dependent manner. N-myc is known to be expressed during embryonic development in epithelial cells involved in branching morphogenesis and homozygous null N-myc mice have defects in lung development. In the present study, TGF beta 1 was shown to inhibit the steady-state level of N-myc RNA 3- to 4-fold at 14 and 48 hours of treatment as measured by northern blot and RNase protection analysis. Suppression of N-myc expression in epithelium was confirmed by in situ hybridization. Since inhibition of N-myc occurred prior to the observed changes in morphology and previous genetic studies have demonstrated and important role for N-myc in lung development, a model is proposed in which TGF beta 1 inhibits tracheobronchial development by inhibiting expression of N-myc.