The process of normal fetal lung development is dependent on "mild" tissue distension (approximately 3 mm Hg) by fluid, resulting in the production of pulmonary surfactant which is necessary for survival at the time of birth. The mechanical "stretching" of lung tissue triggers a cellular differentiation cycle, in part by stimulating the expression and production of cell phenotype-specific soluble cytokines. Pulmonary cytokines regulate differentiation and metabolic function of neighboring cells. For example, tonic stretching of type II alveolar epithelial cells in monolayer culture stimulates the expression and production of the differentiation factor parathyroid hormone-related peptide (PTHrP), which is released by type II cells and specifically binds to its receptor on contiguous fibroblasts, stimulating the "second messenger" cyclic AMP. Tonic distension of cultured type II cells increases PTHrP production, and distension of fibroblasts in monolayer culture increases their PTHrP responsiveness, suggesting that stretching couples and coordinates the production and receptor-mediated action of PTHrP. These data provide a mechanistic basis for the previously observed hand-in-glove spatial pattern of PTHrP and the PTHrP receptor (PTHrPR) in developing terminal airways. PTHrP stimulates specific differentiated functions of fetal lung fibroblasts by: 1) augmenting glucocorticoid binding; 2) increasing metabolic activities directly related to surfactant synthesis, such as lipoprotein lipase elaboration and triglyceride uptake rate; 3) stimulating cytokines, such as interleukins 6 and 11, that can act in a retrograde fashion on epithelial cells; 4) thereby increasing the synthesis of surfactant phospholipids and surfactant-associated proteins, closing this stretch-mediated cell-cell interactive loop. Experimental interruption of this mechanism at any of these steps blocks the spontaneous maturation of the lung in vitro, as evidenced by the inhibition of surfactant production.