ABSTRACT Alveologenesis requires the coordinated modulation of the epithelial and mesenchymal compartments to generate mature alveolar saccules for efficient gas exchange. However, the molecular mechanisms underlying the epithelial-mesenchymal interaction during alveologenesis are poorly understood. Here, we report that Wnts produced by epithelial cells are crucial for neonatal alveologenesis. Deletion of the Wnt chaperone protein Wntless homolog (Wls) disrupts alveolar formation, resulting in enlarged saccules in Sftpc-Cre/Nkx2.1-Cre; Wlsloxp/loxp mutants. Although commitment of the alveolar epithelium is unaffected, α-SMA+ mesenchymal cells persist in the alveoli, accompanied by increased collagen deposition, and mutants exhibit exacerbated fibrosis following bleomycin challenge. Notably, α-SMA+ cells include a significant number of endothelial cells resembling endothelial to mesenchymal transition (EndMT), which is also present in Ager-CreER; Wlsloxp/loxp mutants following early postnatal Wls deletion. These findings provide initial evidence that epithelial-derived Wnts are crucial for the differentiation of the surrounding mesenchyme during early postnatal alveologenesis.