Impaired lung function in early life is associated with the subsequent development of chronic respiratory disease. Most genetic associations with lung function have been identified in adults of European descent and therefore may not represent those most relevant to pediatric populations and populations of different ancestries. In this study, we performed genome-wide association analyses of lung function in a multiethnic cohort of children (n = 1,035) living in low-income urban neighborhoods. We identified one novel locus at the TDRD9 gene in chromosome 14q32.33 associated with percent predicted forced expiratory volume in one second (FEV₁) (p = 2.4x10^-9; β_z = -0.31, 95% CI = -0.41- -0.21). Mendelian randomization and mediation analyses revealed that this genetic effect on FEV₁ was partially mediated by DNA methylation levels at this locus in airway epithelial cells, which were also associated with environmental tobacco smoke exposure (p = 0.015). Promoter-enhancer interactions in airway epithelial cells revealed chromatin interaction loops between FEV₁-associated variants in TDRD9 and the promoter region of the PPP1R13B gene, a stimulator of p53-mediated apoptosis. Expression of PPP1R13B in airway epithelial cells was significantly associated the FEV₁ risk alleles (p = 1.3x10^-5; β = 0.12, 95% CI = 0.06–0.17). These combined results highlight a potential novel mechanism for reduced lung function in urban youth resulting from both genetics and smoking exposure.