Laminin α5 is prominent in the basement membrane of alveolar walls, airways, and pleura in developing and adult lung. Targeted deletion of laminin α5 in mice causes developmental defects in multiple organs, but embryonic lethality has precluded examination of the latter stages of lung development. To identify roles for laminin α5 in lung development, we have generated an inducible lung epithelial cell-specific Lama5 null (SP-CLama5^fl/−) mouse through use of the Cre/loxP system, the human surfactant protein C promoter, and the reverse tetracycline transactivator. SP-CLama5^fl/− embryos exposed to doxycycline from E6.5 died a few hours after birth. Compared to control littermates, SP-CLama5^fl/− lungs had dilated, enlarged distal airspaces, but basement membrane ultrastructure was preserved. Distal epithelial cell differentiation was perturbed, with a marked reduction of alveolar type II cells and a virtual absence of type I cells. Cell proliferation was reduced and apoptosis was increased. Capillary density was diminished, and this was associated with a decrease in total lung VEGF production. Overall, these findings indicate that epithelial laminin α5, independent of its structural function, is necessary for murine lung development, and suggest a role for laminin α5 in signaling pathways that promote alveolar epithelial cell differentiation and VEGF expression.