Nkx2.8, a homeodomain transcription factor, has been characterized in liver cancer and in the developing central nervous system. We now show that this factor is also expressed in the lung, where it localizes in adults to a discrete population of tracheobronchial basal cells. To target the mouse gene, the first exon was replaced by a LacZ marker gene joined to the intact 5'-untranslated region. Marker expression was observed throughout the lower respiratory tract, beginning on E11 in a few cells of the distal lung buds. The region of expression then spread upward. By neonatal day 1, expression was greatest in the large airways and the Nkx2.8-/- mice exhibited generalized tracheobronchial hyperplasia. Bromodeoxyuridine (BrdUrd) labeling studies showed that a higher rate of bronchial cell proliferation persisted at 6 to 8 months. In adults, Nkx2.8 marker expression decreased with progressive differentiation into ciliated and secretory cells. The cell localizations and patterns of coexpression with BrdUrd and differentiation markers suggest a progenitor relationship: the cells that most strongly express Nkx2.8 seem to function as tracheobronchial stem cells. Moreover, Nkx2.8 acts to limit the number of these progenitor cells because the marker-expressing population was greatly expanded in Nkx2.8-/- mice. Increased proliferation and an altered progenitor relationship caused progressive bronchial pathology, which manifested as widespread dysplasia in the large airways of 1-year-old Nkx2.8-/- mice.