Airway branching and vascular growth in the developing lung are co-ordinated processes which involve cross-talk between the primary inducer of airway tube elongation, fibroblast growth factor 10 (FGF-10), and the pro-vasculogenic transcription factor, hypoxia inducible factor-1 α (HIF-1α) (Scott et al., 2010). The FGF receptor antagonist, Sprouty2 (Spry2), influences the duration of this signalling activity and so governs the periodicity of airway and vascular branching along the respiratory tree. However, the mechanism through which Spry2 co-ordinates these events is unknown. Spry2 occurs in the nuclei of both human bronchial epithelial cells (HBE) and fetal distal lung epithelial cells (FDLE), which suggest that it could influence vascular signalling at an epigenetic level. To test this, we hypothesised that Spry2 suppresses transcriptional activity of HIF-1α by direct interaction with the vascular endothelial growth factor A (VEGFA) promoter and so governs the vascular development of the fetal lung. Primary cultures of rat FDLE were isolated from gestation day 19 (E19) fetal Sprague Dawley rats and used to investigate the influence of FGF-10 on Spry2 nuclear function and interaction with the VEGF-A promoter. Immortalised HBE (16HBE14o-) were used for Spry2 overexpression studies. All experiments were conducted in serum-depleted medium at the PO2 of the fetal lung (3% O2). FGF-10 induced a concentration dependent cleavage of nuclear Spry2 which corresponded with an increase in Histone-3 (H3) phosphorylation (pS10) and acetylation (acK14), decreased histone deacteyltransferase 1-3 (HDAC1, HDAC2 and HDAC3) abundance and increased VEGFA mRNA and protein expression. Chromatin immunoprecipitation (ChIP) assays revealed a dominant interaction between Spry2 and a GC rich region of the VEGF-A promoter spanning -124 to -403bp downstream from the HIF response element (HRE). This was associated with enhanced CBP/p300 histone acetyltransferase binding to this same region. Bioinformatic analysis identified a putative Zn2+ finger region in the Spry2 cysteine rich domain; therefore, we tested the effect of mutations to this region upon Spry2-DNA interaction and associated H3 modifications. When over-expressed in HBE, wild-type Spry2 bound strongly to regions spanning the HRE and GC-rich domains of the VEGF-A promoter and this was abolished by C218A or C221A mutation, which also raised H3 pS10, acK14 modification. We conclude that Spry2 directly participates in the epigenetic regulation of VEGFA gene expression. Given its established role as a regulator of airway branching periodicity, we propose that Spry2 links this process to vascular gene expression and so accounts for the tightly co-ordinated development of both structures in the respiratory tree.