Infection or inflammation resulting in preterm delivery can promote lung development. Many components of the inflammatory response could potentially be involved in this beneficial effect. Bacterial endotoxin can induce experimental inflammation in fetal lung explants and we have previously shown that lipopolysaccharide (LPS) increased airway branching, partly due to release of nitric oxide (NO) (Rae and Land, 2004). Here we show that the response to LPS was concentration-dependent, with high and low concentrations having opposite effects. Untreated lung explants from gestation day 14 rats (killed humanely) increased in size over 96 hours in culture and were characterised by the formation of cyst-like structures (airway surface complexity 0-96 hours, ASC = 1.54±0.11, n = 9, all values are Mean±S.E.M.). Exposure to 2 μg/ml LPS induced an increase in airway branching (ASC = 2.01±0.14, n=9, P<0.05, ANOVA, post hoc Tukey's HSD), whereas 10 μg/ml LPS caused proliferation throughout the lung, and decreased airway branching (ASC = 1.01±0.17, n=16, P<0.01 from control and 2 μg/ml LPS). Proliferation after exposure to 10 μg/ml LPS was not caused by increased NO release, which was lower than after exposure to 2 μg/ml LPS (control 10.13±1.05 mM Nitrite per mg protein; 2 μg/ml LPS 72.02±9.47; 10 μg/ml LPS 35.67±5.31, P0.05). Exogenous NO released by diethylenetriamine/NO adduct (DETA-NO, 0.5 mM) resulted in 40-80 fold higher (n=10) NO concentration than LPS, but had no branching or proliferative effect on lung explants, indicating that NO alone was not responsible for this effect. LPS caused activation of the transforming growth factor-beta (TGF-β) pathway, as demonstrated by western blotting, showing nuclear translocation of the SMAD4 signalling molecule. TGF-β is a negative regulator of airway branching and prevents LPS-evoked NO release via inhibition of iNOS (2 μg/ml LPS + 100 ng/ml TGF- β1 – 20.27±4.4 μM Nitrite per μg protein, n=4, P<0.05 from 2 μg/ml LPS). Although TGF-β inhibits epithelial proliferation, it can also cause thickening of pulmonary mesenchyme (Zeng et al., 2001). However, the LPS-induced proliferation was not prevented by co-incubation with TGF-β neutralising antibodies. This suggests that neither NO nor TGF-β alone were responsible for the proliferative effects seen when fetal lung explants are exposed to 10 μg/ml LPS, and we expect that this is caused by the release of other growth factors after exposure to LPS. All procedures accord with current UK legislation