Neural tissue and smooth muscle appear early in the developing fetal lung, but little is known of their origin and subsequent distribution. To investigate the spatial and temporal distribution of nerves, ganglia, and airway smooth muscle during the early pseudoglandular stage, fetal mouse lungs at embryonic days (E) 11 to 14 were immunostained as whole‐mounts and imaged by confocal microscopy. At E11, the primordial lung consisted of the future trachea and two budding epithelial tubules that were covered in smooth muscle to the base of the growing buds. The vagus and processes entering the lung were positive for the neural markers PGP 9.5 (protein gene product 9.5) and synapsin but no neurons were stained at this stage. An antibody to p75^NTR revealed neural crest cells on the future trachea as well as in the vagus and in processes extending from the vagus to the lung. This finding indicates that even though neuronal precursors are already present at this stage, they are still migrating into the lung. By E12, neural tissue was abundant in the proximal part of the lung and nerves followed the smooth muscle‐covered tubules to the base of the growing buds. At E13 and E14, a neural network of interconnected ganglia, innervated by the vagus, covered the trachea. The postganglionic nerves mainly followed the smooth muscle‐covered tubules, but some extended out into the mesenchyme beyond the epithelial buds. Furthermore, we show in a model of cultured lung explants that neural tissue and smooth muscle persist and continue to grow and differentiate in vitro. By using fluorescent markers and confocal microscopy, we present the developing lung as a dynamic structure with smooth muscle and neural tissue in a prime position to influence growth and development. © 2001 Wiley‐Liss, Inc.