Alveoli are formed in the lung by the insertion of secondary tissue folds, termed septa, which are subsequently remodeled to form the mature alveolar wall. Secondary septation requires interplay between three cell types: endothelial cells forming capillaries, contractile interstitial myofibroblasts, and epithelial cells. Here, we report that postnatal lung alveolization critically requires ephrinB2, a ligand for Eph receptor tyrosine kinases expressed by the microvasculature. Mice homozygous for the hypomorphic knockin allele ephrinB2 ⌬V/⌬V , encoding mutant ephrinB2 with a disrupted C-terminal PDZ interaction motif, show severe postnatal lung defects including an almost complete absence of lung alveoli and abnormal and disorganized elastic matrix. Lung alveolar formation is not sensitive to loss of ephrinB2 cytoplasmic tyrosine phosphorylation sites. Postnatal day 1 mutant lungs show extracellular matrix alterations without differences in proportions of major distal cell populations. We conclude that lung alveolar formation relies on endothelial ephrinB2 function. Developmental Dynamics 237:2220 -2234, 2008.