Development of small-granule APUD cells and cell clusters was studied in 13-day to 15-day fetal hamster lungs by periodic acid-Schiff (PAS)-lead hematoxylin staining, monoamine fluorescence, and transmission electron microscopy. We examined 11-day and 12-day fetal, early postnatal, and adult animals only by PAS-lead hematoxylin. Precursors of small-granule cells first appear as PAS-negative clear cells in proximal airways of 13-day lung, occurring singly or in clusters of 2-25 cells and standing out among their undifferentiated, glycogen-laden, PAS-positive neighbors. By 14 days, developing small-granule cell clusters are prominent in main and lobar bronchi, extending 2-3 airway generations into the periphery. Clear-cell clusters, similar to those seen in 13-day lung, appear in peripheral airways and reach within one generation of developing terminal sacs. By 15 days, a few small, small-granule cell clusters are located at bronchioloalveolar junctions. Comparatively mature clusters occur in proximal airways; they are characterized by specific formaldehyde-induced monoamine fluorescence demonstrable after exposure in vitro to 5-hydroxytryptophan. In early postnatal stages, PAS-positive granules are resolvable toward the base of some endocrine cells. Ultrastructurally, pulmonary APUD cells contain numerous membrane-limited granules (180-nm diameter) of varying electron density. In 13-day lung, granules sparsely populate the cytoplasm of clear cells, but as the cells mature, the granule population increases and becomes concentrated in the basal cytoplasm. Fetal development of small-granule cells is therefore compressed into the last 4 days before birth. Most clusters appearing in neonatal lungs are not yet fully mature, and not all subtypes of this population are present until some time later.