K-ras is essential for embryogenesis and its mutations are involved in human developmental syndromes and cancer. To determine the consequences of K-ras activation in urothelium, we used uroplakin-II (UPK II) promoter driven Cre recombinase mice and generated mice with mutated KrasG12D allele in the urothelium (UPK II-Cre;LSL-K-rasG12D). The UPK II-Cre;LSL-K-rasG12D mice died neonatally due to lung morphogenesis defects consisting of simplification with enlargement of terminal air spaces and dysmorphic pulmonary vasculature. A significant alteration in epithelial and vascular basement membranes, together with fragmentation of laminin, points to extracellular matrix degradation as the causative mechanism of alveolar and vascular defects. Our data also suggest that altered protease activity in amniotic fluid might be associated with matrix defects in lung of UPK II-Cre;LSL-K-rasG12. These defects resemble those observed in early stage human neonatal bronchopulmonary dysplasia (BPD), although the relevance of this new mouse model for BPD study needs further investigation.