Exposure to environmental tobacco smoke (ETS) during fetal development and early postnatal life is perhaps the most ubiquitous and hazardous of children's environmental exposures. The developing lung is highly susceptible to ETS. A large body of literature links both prenatal maternal smoking and children's ETS exposure to decreased lung growth. This review summarizes the state of the knowledge, including both human epidemiology and laboratory animal experiments, linking ETS, lung development, and respiratory outcomes. Important issues discussed include lung development and lung function and asthma in relation to ETS exposure during critical windows of growth. Prenatal exposure to ETS is associated with impaired lung function and increased risk of developing asthma, whereas postnatal exposure mainly acts to trigger respiratory symptoms and asthma attacks, but it also plays an important role in the occurrence of asthma in children. This review provides evidence that avoidance of ETS exposure both before and after birth is beneficial to long-term respiratory health, because airway function in later life is believed to be largely determined by lung development occurring in utero and in early infancy.