The development of many organs, including the lung, depends upon a process known as branching morphogenesis, in which a simple epithelial bud gives rise to a complex tree-like system of tubes specialized for the transport of gas or fluids. Previous studies on lung development have highlighted a role for fibroblast growth factors (FGFs), made by the mesodermal cells, in promoting the proliferation, budding, and chemotaxis of the epithelial endoderm. Here, by using a three-dimensional culture system, we provide evidence for a novel role for Netrins, best known as axonal guidance molecules, in modulating the morphogenetic response of lung endoderm to exogenous FGFs. This effect involves inhibition of localized changes in cell shape and phosphorylation of the intracellular mitogen-activated protein kinase(s) (ERK1/2, for extracellular signal-regulated kinase-1 and -2), elicited by exogenous FGFs. The temporal and spatial expression of netrin 1, netrin 4, and Unc5b genes and the localization of Netrin-4 protein in vivo suggest a model in which Netrins in the basal lamina locally modulate and fine-tune the outgrowth and shape of emergent epithelial buds.