Signaling by Bone Morphogenetic Proteins (BMP) has been implicated in early lung development, adult lung homeostasis and tissue-injury repair. However, the precise mechanism of action and the spatio-temporal pattern of BMP-signaling during these processes remains inadequately described. To address this, we have utilized a transgenic line harboring a BMP-responsive eGFP-reporter allele (BRE-eGFP) to construct the first detailed spatiotemporal map of canonical BMP-pathway activation during lung development, homeostasis and adult-lung injury repair. We demonstrate that during the pseudoglandular stage, when branching morphogenesis progresses in the developing lung, canonical BMP-pathway is active mainly in the vascular network and the sub-epithelial smooth muscle layer of the proximal airways. Activation of the BMP-pathway becomes evident in epithelial compartments only after embryonic day (E) 14.5 primarily in cells negative for epithelial-lineage markers, located in the proximal portion of the airway-tree, clusters adjacent to neuro-epithelial-bodies (NEBs) and in a substantial portion of alveolar epithelial cells. The pathway becomes activated in isolated E12.5 mesenchyme-free distal epithelial buds cultured in Matrigel suggesting that absence of reporter activity in these regions stems from a dynamic cross-talk between endoderm and mesenchyme. Epithelial cells with activated BMP-pathway are enriched in progenitors capable of forming colonies in three-dimensional Matrigel cultures.As lung morphogenesis approaches completion, eGFP-expression declines and in adult lung its expression is barely detectable. However, upon tissue-injury, either with naphthalene or bleomycin, the canonical BMP-pathways is re-activated, in bronchial or alveolar epithelial cells respectively, in a manner reminiscent to early lung development and in tissue areas where reparatory progenitor cells reside. Our studies illustrate the dynamic activation of canonical BMP-pathway during lung development and adult lung tissue-repair and highlight its involvement in two important processes, namely, the early development of the pulmonary vasculature and the management of epithelial progenitor pools both during lung development and repair of adult lung tissue-injury.