Fibroblast growth factor (FGF) signaling is required for normal epithelial branching in the respiratory system of several species. Recent studies have shown that FGF-10 may be a key regulator of lung branching morphogenesis, based on its pattern of expression in the early lung and its ability to induce epithelial budding in vitro. In this study we investigate whether FGF-10 is able to direct lung epithelial buds to proper positions during development . We maintained localized high levels of FGF-10 in cultured lungs using FGF-10-soaked heparin beads. FGF-10 exerts a powerful chemoattractant effect on the distal but not on proximal lung epithelium. Epithelial buds grow toward an FGF-10 source within 24 h, and subsequently form concentric layers of epithelium around the bead. BrdU incorporation analysis suggests that FGF-10, in contrast to FGF-7, is a modest proliferation factor for the lung epithelium. In the absence of mesenchyme FGF-10 requires an associated proliferative signal to induce bud migration. This can be provided by extract from lung mesenchyme, or by FGF-7, a growth factor also present in the early embryonic lung. FGF-10 does not seem to interfere with early epithelial cell differentiation. The chemoattractant effect of FGF-10 in the lung epithelium is reminiscent of the patterning effect of the Drosophila FGF ortholog branchless in the developing tracheal epithelium, suggesting that the function of these genes has been conserved during evolution.