Collectively, the above findings demonstrate that activation of the canonical BMP pathway in airway epithelial cells coincides with the beginning of the canalicular stage, when the developmental plan of the lung shifts from branching morphogenesis to the development of distinct respiratory epithelial cell compartments [52] . Keeping in mind that gas conducting airways and blood conducting vessels need to develop in a coordinated manner and be properly juxtaposed to support optimal gas-exchange in the adult, it is understandable that the tips of developing airways should reciprocally exchange growth, differentiation or guidance signals with the developing vasculature and other mesenchymal cells to ensure coordinated development and spatial integration of these two branching systems. The finding that disruption of the vascular network in growing lung explants affects branching morphogenesis by reducing primarily ''orthogonal bifurcations'' of the epithelial tubules [53, 54] and the findings presented herein demonstrating the influence of the adjacent mesenchyme on the activation of the canonical BMP pathway reporter ( Figure 5 ) illustrates the importance of the crosstalk between epithelial and vascular cells during early lung development.