Endogenous glucocorticoid (GC) hormones, signaling via the GC receptor (GR), are essential for normal lung development, and synthetic GCs are routinely used to treat respiratory disorders of very preterm babies. Germline GR knockout (GR(-/-)) mice show immature lung morphology and severe lung cellular hyperplasia during embryogenesis and die at birth due to respiratory failure. Two recent studies have reported contradictory results regarding the necessity for GR expression in specific lung germ layers during respiratory maturation. We further investigate in detail the lung phenotype in mice with a conditional deletion of GR in the endothelium, mesenchyme, and lung epithelium. We show that loss of GR in the mesenchyme alone produces a retarded lung phenotype almost identical to that of germline GR(-/-) mice, including severe postnatal lethality and lung cell hyperplasia. Loss of GR in lung epithelial cells and the endothelium had no gross effect on survival or lung morphology, but loss of epithelial GR caused increased cell proliferation in multiple compartments. Mesenchymal GR loss also produced increased epithelial cell proliferation, implying the existence of GC-regulated germ layer cross-talk. Protein levels of GR-mediated cell cycle regulators, including the cyclin-dependent kinase inhibitor p21(CIP1) and the growth factor midkine, were unaffected by mesenchymal GR deletion, yet expression of the extracellular matrix proteoglycan versican was up-regulated in the distal lung on loss of mesenchymal GR. These results show that GR-mediated signaling from the mesenchyme regulates respiratory maturation and ultimately survival at birth and that a key GR-repressed transcriptional target in lung mesenchymal cells is versican.