The respiratory system is a complex organ system composed of multiple cell types involved in a variety of functions. The development of the respiratory system occurs from embryogenesis to adult life, passing through several distinct stages of maturation and growth. We review embryonic, fetal, and postnatal phases of lung development. We also discuss branching morphogenesis and cellular differentiation of the respiratory system, as well as the postnatal development of xenobiotic metabolizing systems within the lungs. Exposure of the respiratory system to a wide range of chemicals and environmental toxicants during perinatal life has the potential to significantly affect the maturation, growth, and function of this organ system. Although the potential targets for exposure to toxic factors are currently not known, they are likely to affect critical molecular signals expressed during distinct stages of lung development. The effects of exposure to environmental tobacco smoke during critical windows of perinatal growth are provided as an example leading to altered cellular and physiological function of the lungs. An understanding of critical windows of exposure of the respiratory system on children's health requires consideration that lung development is a multistep process and cannot be based on studies in adults.