PTEN is a tumor suppressor gene mutated in many human cancers. We generated a bronchioalveolar epithelium-specific null mutation of Pten in mice [SP-C-rtTA/(tetO)(7)-Cre/Pten(flox/flox)(SOPten(flox/flox)) mice] that was under the control of doxycycline. Ninety percent of SOPten(flox/flox) mice that received doxycycline in utero [SOPten(flox/flox)(E10-16) mice] died of hypoxia soon after birth. Surviving SOPten(flox/flox)(E10-16) mice and mice that received doxycycline postnatally [SOPten(flox/flox)(P21-27) mice] developed spontaneous lung adenocarcinomas. Urethane treatment accelerated number and size of lung tumors developing in SOPten(flox/flox) mice of both ages. Histological and biochemical examinations of the lungs of SOPten(flox/flox)(E 10-16) mice revealed hyperplasia of bronchioalveolar epithelial cells and myofibroblast precursors, enlarged alveolar epithelial cells, and impaired production of surfactant proteins. Numbers of bronchioalveolar stem cells (BASCs), putative initiators of lung adenocarcinomas, were increased. Lungs of SOPten(flox/flox)(E10-16) mice showed increased expression of Spry2, which inhibits the maturation of alveolar epithelial cells. Levels of Akt, c-Myc, Bcl-2, and Shh were also elevated in SOPten(flox/flox)(E10-16) and SOPten(flox/flox)(P21-27) lungs. Furthermore, K-ras was frequently mutated in adenocarcinomas observed in SOPten(flox/flox)(P21-27) lungs. These results indicate that Pten is essential for both normal lung morphogenesis and the prevention of lung carcinogenesis, possibly because this tumor suppressor is required for BASC homeostasis.