Triamcinolone acetonide (TAC) has a potent teratogenic effect on various mammalian fetal tissues as well as a steroid effect on the lung. Less well documented is the fact that it produces profound oligohydramnios. We wished to determine what effect TAC would have on branching morphogenesis and other aspects of lung development, using an in vivo model described previously. Thirty rats were randomized to receive 0.6 mg/kg of TAC or saline on days 12, 13, and 14 of gestation. At gestational days 15, 17, 18, and 21, the left lungs of 365 fetuses were studied by dissecting microscopy, histology, and morphometry. TAC produced profound pulmonary hypoplasia (dry Jung weight/body weight 0.025, compared with 0.06 in controls) on day 21. TAC decreased maternal weight gain, fetal weight, placental weight, aminiotic fluid, and pole to pole length (PTP), while it increased the peripheral airway count (PAC). The number of central and intermediate airway branches was reduced, and they were dilated. Growth of peripheral airways was enhanced. In treated fetuses epithelial cells lining these airspaces were histologically more mature and the mesenchyme thinner than in controls. These findings were confirmed by the morphometric measurements. We conclude that when TAC is administered in the early phase of fetal rat lung development, the lungs become hypoplastic, with hypoplasia of the intermediate airways, an increase in the number of peripheral airways, and increased differentiation. We speculate that these effects are primarily due to the steroid action of TAC and that the mechanisms of monopodial branching are different from those of dichotomous branching.