The lungs undergo an extensive endodermal diverging morphogenesis along with alveogenesis, angiogenesis, and vasculogenesis to secure a sufficient diffusion surface for gaseous exchange. Any aberration in the course of normal development inculcating structural and functional abnormalities of lungs in antenatal life has potential morbidity in adult life. Factors such as IUGR, nutrient deficiency, FLM, Hypoxemia, ETS, surfactant deficiency, allergy and infections can adversely affect in-utero lungs development. Peculiar local and systemic inflammatory immune responses may elicit persistent architectural and physiological abnormalities. Lung surfactant produced by AEC-II cells is a mixture of phospholipids, surfactant proteins, and neutral lipids. Surfactant lowers alveolar surface tension, a crucial step for the prevention of alveolar collapse. Surfactant proteins are part of the innate immune defense of the lung. Surfactant deficiency and dysfunction is known to implicate a number of respiratory diseases especially allergic asthma and NRDS. The present article provides a state of the art review of the current knowledge of biology of normal lung development, its anatomical and molecular aspects, factors that regulate normal organogenesis of pulmonary system and molecular basis of respiratory allergic disorders including asthma.