miR-200b plays a role in epithelial-to-mesenchymal transition (EMT) in cancer. We recently reported abnormal expression of miR-200b in the context of human pulmonary hypoplasia in congenital diaphragmatic hernia (CDH). Smaller lung size, a lower number of airway generations, and a thicker mesenchyme characterize pulmonary hypoplasia in CDH. The aim of this study was to define the role of miR-200b during lung development. Here we show that miR-200b-/- mice have abnormal lung function due to dysfunctional surfactant, increased fibroblast-like cells and thicker mesenchyme in between the alveolar walls. We profiled the lung transcriptome in miR-200b-/- mice, and, using Gene Ontology analysis, we determined that the most affected biological processes include cell cycle, apoptosis and protein transport. Our results demonstrate that miR-200b regulates distal airway development through maintaining an epithelial cell phenotype. The lung abnormalities observed in miR-200b-/- mice recapitulate lung hypoplasia in CDH.