Background: During development of the avian lung, the initially terminally branched epithelial tree later forms a continuous network of airways. This occurs via a large-scale epithelial fusion event, wherein airways that originate proximally collide with those that originate distally to form one continuous lumen. Results: Here, we found that prior to fusion, the epithelium of the embryonic chicken lung undergoes a shape change to permit the initiation and extension of new branches which contain the cells that initiate contact. These changes in epithelial shape coincide with the differentiation of smooth muscle cells that wrap the airways. From these nascent epithelial branches, individual cells form cytoskeletal protrusions that extend toward and form a bridge with their target airway. Additional cells then join the fusion site, forming a bilayered epithelium. During this process, the basement membrane around the prefusion epithelium degrades and then reforms after fusion. The epithelial bilayer then undergoes apoptosis, clearing the path between the two lumens. Conclusions: The process of airway epithelial fusion in the developing chicken lung constitutes a novel mechanism for the generation of complex multicellular tubes and suggests a conserved role for smooth muscle in the shaping of airway epithelia.