Early embryonic lung branching morphogenesis is regulated by many growth factor-mediated pathways. Bone morphogenetic protein 4 (BMP4) is one of the morphogens that stimulate epithelial branching in mouse embryonic lung explant culture. To further understand the molecular mechanisms of BMP4-regulated lung development, we studied the biological role of Smad-ubiquitin regulatory factor 1 (Smurf1), an ubiquitin ligase specific for BMP receptor-regulated Smads, during mouse lung development. The temporo-spatial expression pattern of Smurf1 in mouse embryonic lung was first determined by quantitative real-time PCR and immunohistochemistry. Overexpression of Smurf1 in airway epithelial cells by intratracheal introduction of recombinant adenoviral vector dramatically inhibited embryonic day (E) 11.5 lung explant growth in vitro. This inhibition of lung epithelial branching was restored by coexpression of Smad1 or by addition of soluble BMP4 ligand into the culture medium. Studies at the cellular level show that overexpression of Smurf1 reduced epithelial cell proliferation and differentiation, as documented by reduced PCNA-positive cell index and by reduced mRNA levels for surfactant protein C and Clara cell protein 10 expression. Further studies found that overexpression of Smurf1 reduced BMP-specific Smad1 and Smad5, but not Smad8, protein levels. Thus overexpression of Smurf1 specifically promotes Smad1 and Smad5 ubiquitination and degradation in embryonic lung epithelium, thereby modulating the effects of BMP4 on embryonic lung growth.