The TGF-β signaling pathway plays a pivotal role in controlling organogenesis during fetal development. Although the role of TGF-β signaling in promoting lung alveolar epithelial growth has been determined, mesenchymal TGF-β signaling in regulating lung development has not been studied in vivo due to a lack of genetic tools for specifically manipulating gene expression in lung mesenchymal cells. Therefore, the integral roles of TGF-β signaling in regulating lung development and congenital lung diseases are not completely understood. Using a Tbx4 lung enhancer-driven Tet-On inducible Cre transgenic mouse system, we have developed a mouse model in which lung mesenchyme-specific deletion of TGF-β receptor 2 gene ( Tgfbr2) is achieved. Reduced airway branching accompanied by defective airway smooth muscle growth and later peripheral cystic lesions occurred when lung mesenchymal Tgfbr2 was deleted from embryonic day 13.5 to 15.5, resulting in postnatal death due to respiratory insufficiency. Although cell proliferation in both lung epithelium and mesenchyme was reduced, epithelial differentiation was not significantly affected. Tgfbr2 downstream Smad-independent ERK1/2 may mediate these mesenchymal effects of TGF-β signaling through the GSK3β-β-catenin-Wnt canonical pathway in fetal mouse lung. Our study suggests that Tgfbr2-mediated TGF-β signaling in prenatal lung mesenchyme is essential for lung development and maturation, and defective TGF-β signaling in lung mesenchyme may be related to abnormal airway branching morphogenesis and congenital airway cystic lesions.