Epithelial organs are almost universally secretory. The lung secretes mucus of extremely variable consistency. In the early prenatal period, the secretions are of largely unknown composition, consistency, and flow rates. In addition to net outflow from secretion, the embryonic lung exhibits transient reversing flows from peristalsis. Airway peristalsis (AP) begins as soon as the smooth muscle forms, and persists until birth. Since the prenatal lung is liquid-filled, smooth muscle action can transport fluid far from the immediately adjacent tissues. The sensation of internal fluid flows has been shown to have potent morphogenetic effects, as has the transport of morphogens. We hypothesize that these effects play an important role in lung morphogenesis. To test these hypotheses in a quantitative framework, we analyzed the fluid-structure interactions between embryonic tissues and lumen fluid resulting from peristaltic waves that partially occlude the airway. We found that if the airway is closed, fluid transport is minimal; by contrast, if the trachea is open, shear rates can be very high, particularly at the stenosis. We performed a parametric analysis of flow characteristics' dependence on tissue stiffnesses, smooth muscle force, geometry, and fluid viscosity, and found that most of these relationships are governed by simple ratios. We measured the viscosity of prenatal lung fluid with passive bead microrheology. This paper reports the first measurements of the viscosity of embryonic lung lumen fluid. In the range tested, lumen fluid can be considered Newtonian, with a viscosity of 0.016 ± 0.008 Pa-s. We analyzed the interaction between the internal flows and diffusion and conclude that AP has a strong effect on flow sensing away from the tip and on transport of morphogens. These effects may be the intermediate mechanisms for the enhancement of branching seen in occluded embryonic lungs.