Retinoic acid (RA) is crucial for lung development. Although the effects of RA deficiency are well known in early lung development, the roles of RA in foetal lung maturation are less well understood. Now, Ondine Cleaver and colleagues use immunohistochemistry, transcriptome data and mouse genetics to explore the function of Cyp26b1, which catabolises RA, in the late gestation lung. First, the authors show that Cyp26b1 is enriched in lung endothelial cells. Next, they observe that Cyp26b1−/− mouse lungs are smaller and denser, with specific defects in distal airway morphogenesis from E16.5. At the cellular level, lungs from Cyp26b1−/−mice show a lower proportion of pulmonary alveolar type I (AT1) cells and increased number of AT2 cells. However, the number of AT1 and AT2 progenitors are similar, which indicates that mice have defects in cell differentiation rather than specification. Finally, the researchers can partially recapitulate the Cyp26b1−/− phenotype by providing exogenous all-trans RA (atRA). Indeed, in atRA-treated Cyp26b1+/+ animals, the lungs are morphologically similar to Cyp26b1−/− mice but the ratio of AT1/AT2 cells is not altered. Although the mechanism remains to be elucidated, these data indicate a role for the vascular endothelium in modulating lung development through the degradation of RA.