The precise spatial-temporal role that expression and activation of transforming growth factor (TGF)-beta plays in mammalian organ morphogenesis remains incompletely understood. Using replication deficient adenoviral vectors containing engineered TGF-beta1 cDNAs, we studied the spatial effects of locally over-expressing either latent or mutated, constitutively active TGF-beta1 protein during embryonic mouse lung branching morphogenesis in culture. Transfer of exogenous genes into lung epithelium was achieved by intra-tracheal micro-injection of recombinant adenovirus, while submerging lungs in virus resulted in gene transfer into the pleura and subjacent mesenchymal cells, as revealed by cytochemical staining for beta-galactosidase. Only lungs transfected with active, but not latent TGF-beta1 gene, showed elevated levels of active TGF-beta. Epithelial over-expression of active, but not latent TGF-beta1, via intra-tracheal micro-injection inhibited lung branching morphogenesis by 36 %. In contrast, lungs submerged with either active or latent TGF-beta1 recombinant virus did not demonstrate an inhibitory effect upon branching. Pulmonary gene regulation was assayed by competitive polymerase chain reaction coupled with reverse transcription. Direct respiratory tract micro-injection of adenovirus over-expressing active TGF-beta1 resulted in a dose-dependent inhibition of epithelial surfactant protein (SP)-C and SP-B mRNA levels by up to 76 % and 70 %, respectively, while in contrast, fibronectin and matrix Gla protein (MGP) mRNA levels remained stable. However, lungs that had been submerged in adenovirus expressing active TGF-beta1 demonstrated a concentration-dependent induction of both fibronectin and MGP mRNA levels up to 4.3- and 4.7-fold respectively in the presence of 1 x 10(11) pfu/ml active TGF-beta1 virus. On the other hand, lungs treated with adenovirus expressing latent TGF-beta1 either by micro-injection or submerging failed to demonstrate any regulatory effect either upon epithelial or mesenchymal gene expression. We conclude that adenovector-mediated over-expression of activated TGF-beta1 in specific spatial compartments results respectively in either inhibition of branching morphogenesis and epithelium-specific gene expression, or in induction of matrix gene expression without affecting morphogenesis or epithelium-specific gene expression, depending on the route of administration. Also, the lack of effect of latent TGF-beta1 over-expression strongly suggests that TGF-beta activation per se provides an important locus of fine regulation of the spatial effects of TGF-beta signaling during embryonic lung branching morphogenesis.