Human lung development and disease has been difficult to study due to the lack of biologically relevant in vitro model systems. Human induced pluripotent stem cells (hiPSCs) can be differentiated stepwise into 3D multicellular lung organoids, made of both epithelial and mesenchymal cell populations. We recapitulate embryonic developmental cues by temporally introducing a variety of growth factors and small molecules to efficiently generate definitive endoderm, anterior foregut endoderm, and subsequently lung progenitor cells. These cells are then embedded in growth factor reduced (GFR)-basement membrane matrix medium, allowing them to spontaneously develop into 3D lung organoids in response to external growth factors. These whole lung organoids (WLO) undergo early lung developmental stages including branching morphogenesis and maturation after exposure to dexamethasone, cyclic AMP and isobutylxanthine. WLOs possess airway epithelial cells expressing the markers KRT5 (basal), SCGB3A2 (club) and MUC5AC (goblet) as well as alveolar epithelial cells expressing HOPX (alveolar type I) and SP-C (alveolar type II). Mesenchymal cells are also present, including smooth muscle actin (SMA), and platelet-derived growth factor receptor A (PDGFRα). iPSC derived WLOs can be maintained in 3D culture conditions for many months and can be sorted for surface markers to purify a specific cell population. iPSC derived WLOs can also be utilized to study human lung development, including signaling between the lung epithelium and mesenchyme, to model genetic mutations on human lung cell function and development, and to determine the cytotoxicity of infective agents.