Heparin-binding epidermal growth factor-like growth factor (HB-EGF) is a member of the EGF family of growth factors that is suggested to be involved in distal lung development. In HB-EGF null (HB del/del ) newborns, a histopathologic analysis revealed abnormally thick saccular walls occurring from embryonic day 18.5 that reduced the terminal saccular space area. HB-EGF gene deletion resulted in a significant increase in cell proliferation, indicating that HB-EGF suppresses distal lung cell proliferation. Furthermore, an analysis of saccular morphology and proliferation in HB-EGF and transforming growth factor-␣ (TGF␣) double-mutant newborns revealed that HB-EGF and TGF␣ function synergistically in this suppression. Finally, crosses between HB del/del mice and waved 2 mice, a hypomorphic EGF receptor (EGFR) mutant strain, suggest that HB-EGF and EGFR cooperate in this process. Thus, HB-EGF has a novel suppressive function that contributes to decelerating distal lung cell proliferation synergistically with TGF␣ through EGFR in perinatal distal lung development. Developmental Dynamics 237:247-258, 2008.