Epithelial-mesenchymal signals regulate respiratory specification. Raldh enzyme produces RA in the splanchnic mesenchyme surrounding the foregut. RA signals to the epithelium, promoting Shh ligand expression, which in turn functions through Gli effectors in the mesenchyme. HH activity is required for essential mesenchymal lung-inducing signals including Wnt2/2b and Bmp ligands. Those ventral Wnt and Bmp signals instruct ventral epithelium to initiate the respiratory program, marked by inducing Nkx2-1 while repressing Sox2 expression. RA signaling also coordinates patterning in the endoderm and mesoderm with appropriate competence to respond to inducing signals, including a range of mesenchymal identity genes such as Foxf1, Osr1, Gata4/6, and Tbx4/5. Additionally, dorsal signals such as Noggin antagonize ventral respiratory inducing signals, allowing for esophagus formation.