It is very intriguing that 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] , the BMP-responsive eGFP reporter is activated in two epithelial domains, namely, the proximal airways and the distal developing alveolar sacs. The conclusion that canonical BMP signaling becomes crucial for lung epithelial cell development at the cannalicular stage is consistent with earlier genetic studies demonstrating that deletion of Bmpr1 [16, 18] or Smad1 [19] and ectopic expression of negative regulators of BMP signaling such as XNoggin and dominantnegative ALK6 [15] by SpC-promoter-driven expression, resulted in defects in lung development visible only around E15-E16, i.e. after completion of the branching morphogenesis.