Lung maturation at the terminal sac stage of lung development is characterized by a coordinated increase in terminal sac formation and vascular development in conjunction with the differentiation of alveolar type I and type II epithelial cells. The Cited2-Tcfap2a/c complex has been shown to activate transcription of Erbb3 and Pitx2c during mouse development. In this study, we show that E17.5 to E18.5 Cited2-null lungs had significantly reduced terminal sac space due to an altered differentiation of type I and type II alveolar epithelial cells. In addition, E17 Cited2-null lungs exhibited a decrease in the number of apoptotic cells, contributing to the loss in airspace. Consistent with the phenotype, genes associated with alveolar cell differentiation and survival were differentially expressed in Cited2-null fetal lungs compared to those of wild-type littermates. Moreover, expression of Cebpa, a key regulator of airway epithelial maturation, was significantly decreased in Cited2-null fetal lungs. Cited2 and Tcfap2c were present on the Cebpa promoter in E18.5 lungs to activate Cebpa transcription. We propose that the Cited2-Tcfap2c complex controls lung maturation by regulating Cebpa expression. Understanding the function of this complex may provide novel therapeutic strategies for patients with respiratory distress syndromes.