Many pediatric pulmonary diseases are associated with significant morbidity and mortality due to impairment of alveolar development. The lack of an appropriate in vitro model system limits the identification of therapies aimed at improving alveolarization. Herein, we characterize an ex vivo lung culture model that facilitates investigation of signaling pathways that influence alveolar septation. Postnatal Day 4 (P4) mouse pup lungs were inflated with 0.4% agarose, sliced, and cultured within a collagen matrix in medium that was optimized to support cell proliferation and promote septation. Lung slices were grown with and without 1D11, an active transforming growth factor-β-neutralizing antibody. After 4 days, the lung sections (designated P4 + 4) and noncultured lung sections were examined using quantitative morphometry to assess alveolar septation and immunohistochemistry to evaluate cell proliferation and differentiation. We observed that the P4 + 4 lung sections exhibited ex vivo alveolarization, as evidenced by an increase in septal density, thinning of septal walls, and a decrease in mean linear intercept comparable to P8, age-matched, uncultured lungs. Moreover, immunostaining showed ongoing cell proliferation and differentiation in cultured lungs that were similar to P8 controls. Cultured lungs exposed to 1D11 had a distinct phenotype of decreased septal density when compared with untreated P4 + 4 lungs, indicating the utility of investigating signaling in these lung slices. These results indicate that this novel lung culture system is optimized to permit the investigation of pathways involved in septation, and potentially the identification of therapeutic targets that enhance alveolarization.