Mechanisms that regulate tissue-specific progenitors for maintenance and differentiation during development are poorly understood. Here, we demonstrate that the co-repressor protein Sin3a is critical for lung endoderm development. Loss of Sin3a in early foregut endoderm leads to a specific and profound defect in lung development with lung buds failing to undergo branching morphogenesis and progressive atrophy of the proximal lung endoderm with complete epithelial loss at later stages of development. Consequently, neonatal pups died at birth due to respiratory insufficiency. Further analysis revealed that loss of Sin3a resulted in embryonic lung epithelial progenitor cells adopting a senescence-like state with permanent cell cycle arrest in G1 phase. This was mediated at least partially through the upregulation of cell cycle inhibitors p21/Cdkn1a and p18/Cdkn2c. At the same time, loss of endodermal Sin3a also disrupted cell differentiation of the mesoderm, suggesting aberrant epithelial-mesenchymal signaling. Together, these findings reveal that Sin3a is an essential regulator for early lung endoderm specification and differentiation.