Extracellular matrix is important to organogenesis and may function by modifying cellular adhesion, motility, proliferation, and differentiation. Tenascin-C (TN-C) is a matrix molecule reported to bind some cell lines and to inhibit adhesion of some cell types to fibronectin. This report describes the ontogeny and possible functions of TN-C expression in fetal and newborn rat lung. There was a moderate concentration of TN-C protein at the epithelial-mesenchymal interface during fetal lung development in the period of branching morphogenesis. There was a remarkable accumulation of TN-C during the first postnatal week when alveolarization peaked, followed by a decline to barely detectable levels after the third postnatal week when alveolarization was essentially completed. Loss of TN-C protein followed quickly the loss of TN-C mRNA, suggesting a rapid turnover of TN-C in the extracellular matrix. By light microscopy, immunoreactive TN-C was present in early postnatal lung at the epithelial-mesenchymal interface and was distributed throughout lung mesenchyme. Electron microscopic immunocytochemistry showed TN-C was not a part of the basal lamina and that its lung localization was punctate and different from the uniform distribution of laminin. Antiserum to TN-C significantly inhibited branching morphogenesis of fetal lung explants but did not block their growth. Three bacterially expressed segments of TN-C comprising different fibronectin type III domains inhibited branching morphogenesis as effectively as did antiserum, but an expression protein of the carboxyterminal fibrinogen-like segment had no effect. We conclude that TN-C is expressed in a spatio-temporal pattern consistent with a role in lung development and our in vitro studies indicated a functional role for TN-C during lung branching morphogenesis.