Vascular endothelial growth factor-A (VEGF-A) is required for vascular development throughout the embryo and has been proposed to play an important role in pulmonary vascular patterning. Expressed by the embryonic respiratory epithelium, VEGF-A signals endothelial cells within the splanchnic mesenchyme. To refine understanding of the spatial and temporal role of VEGF-A in lung morphogenesis, isoform VEGF164 was expressed under conditional control in distal and proximal airway epithelial cells. Unexpectedly, increased expression of VEGF164 in distal lung disrupted peripheral vascular net assembly and arrested branching of airways tubules without altering endothelial cell proliferation or apoptosis. Peripheral airway branching and vascular smooth muscle patterning were also altered. In contrast, expression of VEGF164 by epithelial cells of the conducting airways caused atypical evaginations of small capillary-like vessels into large airways but did not alter peripheral vascular net assembly or branching morphogenesis. These data demonstrate that the differential response of endothelial cells in distal vascular beds and large central blood vessels is established early in lung development. Precise temporal and spatial expression of VEGF-A is required for vascular patterning during lung morphogenesis. Disruption of pulmonary vascular assembly perturbs reciprocal interactions with epithelium leading to altered airway branching morphogenesis.