The gene regulatory networks that coordinate the development of the cardiac and pulmonary systems are essential for terrestrial life but poorly understood. The T-box transcription factor Tbx5 is critical for both pulmonary specification and heart development, but how these activities are mechanistically integrated remains unclear. Here using Xenopus and mouse embryos, we establish molecular links between Tbx5 and retinoic acid (RA)-signaling in the mesoderm and between RA signaling and sonic hedgehog expression in the endoderm to unveil a conserved RA-Hedgehog-Wnt signaling cascade coordinating cardiopulmonary development. We demonstrate that Tbx5 directly maintains expression of aldh1a2, the RA-synthesizing enzyme, in the foregut lateral plate mesoderm via an evolutionarily conserved intronic enhancer. Tbx5 promotes posterior second heart field identity in a positive feedback loop with RA, antagonizing a Fgf8-Cyp regulatory module to restrict FGF activity to the anterior. We find that Tbx5/Aldh1a2-dependent RA signaling directly activates shh transcription in the adjacent foregut endoderm through a conserved MACS1 enhancer. Hedgehog signaling coordinates with Tbx5 in the mesoderm to activate expression of wnt2/2b, which induces pulmonary fate in the foregut endoderm. These results provide mechanistic insight into the interrelationship between heart and lung development informing cardiopulmonary evolution and birth defects.