Lung development is a complex and finely balanced process. Yet the lung has a relatively limited repertoire of responses to injury, which, depending on severity of the injury and developmental stage and susceptibility of the lung, culminate in stopping development, followed by more or less successful repair or alternatively in fibrosis. Unlike fetal skin, which heals scarlessly early in gestation, but scars later in gestation and increasingly so postnatally, the damaged fetal lung does heal, but not very well. Thus lung injury appears to entrain a default developmental/repair mechanism involving increased amounts of activated TGF beta ligand signaling. When this occurs prior to or very early in the process of alveolarization, excessive TGF beta ligand inhibits further alveolarization, a disease process phenotype that has been termed Bronchopulmonary Dysplasia in extreme human prematurity. However, once alveolarization is sufficiently advanced as in mid to late gestation fetal monkey, late gestation human or adult mouse, rat or human lung, excessive TGF beta signaling results in pulmonary fibrosis. Recently we have further shown that FGF10 signaling, a process that is necessary for distal lung morphogenesis, can also antagonize bleomycin-induced lung fibrosis in adult mice by a mechanism involving inhibition of active TGF beta ligand bioavailability. We therefore suggest that lung development, repair and fibrosis have many fundamental mechanisms in common, that potentially can be manipulated using cells or soluble factors that optimize the alveolar milieu to prevent and possibly even to reverse lung fibrosis.