Pulmonary cysts and spontaneous pneumothorax are presented in most patients with Birt-Hogg-Dubé (BHD) syndrome, which is caused by loss of function mutations in the folliculin (FLCN) gene. The pathogenic mechanisms underlying the cystic lung disease in BHD are poorly understood.Mesenchymal Flcn was specifically deleted in mice or in cultured lung mesenchymal progenitor cells using a Cre/loxP approach. Dynamic changes in lung structure, cellular and molecular phenotypes and signalling were measured by histology, immunofluorescence staining and immunoblotting.Deletion of Flcn in mesoderm-derived mesenchymal cells results in significant reduction of postnatal alveolar growth and subsequent alveolar destruction, leading to cystic lesions. Cell proliferation and alveolar myofibroblast differentiation are inhibited in the Flcn knockout lungs, and expression of the extracellular matrix proteins Col3a1 and elastin are downregulated. Signalling pathways including mTORC1, AMP-activated protein kinase, ERK1/2 and Wnt-β-catenin are differentially affected at different developmental stages. All the above changes have statistical significance (p<0.05).Mesenchymal Flcn is an essential regulator during alveolar development and maintenance, through multiple cellular and molecular mechanisms. The mesenchymal Flcn knockout mouse model provides the first in vivo disease model that may recapitulate the stages of cyst development in human BHD. These findings elucidate the developmental origins and mechanisms of lung disease in BHD.