Lung development in mice involves specification of the primary lung field followed by the formation of lung buds, which subsequently undergo outgrowth and branching morphogenesis to form the stereotypic bronchial tree. Localised expression of Fgf10 in the distal mesenchyme adjacent to the sites of lung bud formation has long been thought to drive branching morphogenesis in the lung but now, on p. 3731, Stijn De Langhe and colleagues challenge this model. They show that lung agenesis in Fgf10 knockout mice can be rescued by ubiquitous overexpression of Fgf10, demonstrating that localised Fgf10 expression is not required for lung branching morphogenesis in vivo. Instead, they report, localised Fgf10 prevents the differentiation of distal epithelial progenitors into Sox2-expressing airway epithelial cells, thus suggesting that Fgf10 plays a role in proximal-distal patterning. Furthermore, they show that, later in development, Fgf10 can promote the differentiation of airway epithelial cells to basal cells, a finding that has important implications for understanding and improving lung injury and repair.