Congenital peribronchial myofibroblastic tumor (CPMT) is a rare benign infantile pulmonary neoplasm that presents prenatally, or early in infancy, and exhibits distinctive histologic features characterized by the presence of cartilaginous islands intermixed with bland spindle cells, not uncommonly displaying prominent mitoses. Despite its benign nature, CPMT can lead to fetal demise, postnatal respiratory distress, or complications from perinatal surgical resection. Although the morphologic and clinical features of CPMT are well described, its molecular features and oncogenesis remain elusive. Following the detection of EGFR kinase domain duplication (KDD) of exons 18 to 25 in an index case, we identified 3 additional cases of morphologically classic and clinically wellcharacterized CPMTs from the archives and performed targeted RNA- and DNA-based profiling via next-generation sequencing for detection of rearrangements, sequence variants, and copy number variants on all cases. Two cases were detected prenatally, 1 patient presented at birth, and 1 at 8 weeks of life. All tumors were resected, with a follow-up period ranging from 0 days to 10 years. One patient died shortly after surgical resection, and the other 3 had no recurrences. In all cases, EGFR KDD was detected. In 2 out of 4 cases, gains of select whole chromosomes were noted. Our findings establish EGFR KDD as a recurrent oncogenic driver of CPMT. Notably, this alteration is also found in classical congenital mesoblastic nephromas, infantile kidney tumors with which CPMTs share striking morphologic and clinical similarities. This strongly suggests that CPMTs and classical congenital mesoblastic nephromas share common oncogenesis, and represent the same tumor in different locations. EGFR KDDs have also been reported in neonatal soft tissue tumors with infantile fibrosarcoma-like histology and cartilaginous differentiation, raising questions about their relationship. EGFR KDD emerges as a diagnostic marker, a potential therapeutic target, and a window into the oncogenesis of a distinct subset of infantile mesenchymal tumors. (c) 2024 THE AUTHORS. Published by Elsevier Inc. on behalf of the United States & Canadian Academy of Pathology. This is an open access article under the CC BY-NC-ND license (http://creativecommons. org/licenses/by-nc-nd/4.0/).

Myoepithelial carcinoma is an ultra-rare pediatric solid tumor with no targeted treatments. Clinical implementation of tumor RNA sequencing (RNA-Seq) for identifying therapeutic targets is underexplored in pediatric cancer. We previously published the Comparative Analysis of RNA Expression (CARE), a framework for incorporating RNA-Seq-derived gene expression into the clinic for difficult-to-treat pediatric cancers. Here, we discuss a 4-year-old male diagnosed with myoepithelial carcinoma who was treated at Stanford Medicine Children's Health. A metastatic lung nodule from the patient underwent standard-of-care tumor DNA profiling and CARE analysis, wherein the patient's tumor RNA-Seq profile was compared to over 11,000 uniformly analyzed tumor profiles from public data repositories. DNA profiling yielded no actionable mutations. CARE identified overexpression biomarkers and nominated a treatment that produced a durable clinical response. These findings underscore the utility of data sharing and concurrent analysis of large genomic datasets for clinical benefit, particularly for rare cancers with unknown biological drivers.

Context.— Malignant peripheral nerve sheath tumor (MPNST) is a rare, often high-grade sarcoma. A small subset of MPNST shows evidence of heterologous rhabdomyoblastic differentiation, also known as malignant triton tumor (MTT). Immunohistochemical loss of histone 3 lysine 27 trimethylation (H3K27me3) has previously been described as a reliable marker for both MPNST and MTT. Objective.— To assess the loss of H3K27me3 as a potential tool for discriminating MTT from embryonal rhabdomyosarcoma (ERMS). Design.— We studied the immunohistochemical expression of H3K27me3 in 23 pediatric cases of confirmed ERMS. Of the 23 patients, 21 were male and 2 were female, with an age range of 2 months to 18 years (median, 5 years). Most of the tumors arose in the paratesticular soft tissue (n = 14), with other locations including the pelvis (n = 3), thigh (n = 2), abdomen (n = 1), orbit (n = 1), prostate gland (n = 1), and parotid gland (n = 1). All cases had characteristic morphologic features of ERMS. Results.— By immunohistochemistry, all tested cases expressed desmin (18 of 18), myogenin (20 of 20), and MyoD1 (5 of 5). More than half of the cases (12 of 23; 52%) showed loss (nuclear absence) of H3K27me3, defined as staining in less than 5% of the tumor cells. The remaining cases demonstrated some degree of partial staining with H3K27me3, ranging from 5 to 40% of the tumor cells. No significant correlation between H3K27me3 expression and clinicopathologic features was identified. Conclusions.— Loss of H3K27me3 frequently occurs in ERMS (52%) and is not reliable in distinguishing ERMS from MTT.

Neuroblastoma (NB) is the most frequent extracranial childhood tumor. The majority of NB tumors arise in the adrenal gland with bone marrow (BM) metastases present in 70.5% of Stage IV disease. A recent study using 23 most commonly used two-dimensional (2D) adherent NB cell lines found that expression of GD2, a target for immunotherapy, is significantly correlated with adrenergic (ADRN) and mesenchymal (MES) cell lineages through epigenetic regulation of ganglioside synthesis enzyme ST8SIA1. We aimed to establish primary NB patient cell line from adrenal NB or BM metastasis to determine whether ADRN and MES lineage specific phenotypes exist in primary NB patient cells and are also associated with distinct GD2 and ST8SIA1 expression. Using our in vitro primary cell culture conditions, all NB cells derived from four individual patients’ BM metastases spontaneously assembled into three-dimensional (3D) spheroids in scaffold-free regular culture plates with a predominant GD2 high ADRN cell type as determined by flow cytometric and immunofluorescent analysis of ADRN marker genes. Cells maintained self-assembling ability for multiple passages (up to 30) within 5-8 months of prolonged in vitro cultures at a sustainable growth rate. In contrast to the BM-derived NB cells, a majority of the adrenal tumor-derived NB cells became 2D adherent within 7-10 days and displayed marked changes in immuno-phenotypes after several weeks, shifting from predominantly GD2-high to a mixture of high and low GD2 expression. Forcing the adherent NB cells with mixed GD2 level into suspension cultures using Corning’s 3D Ultra-Low Attachment (ULA) plate resulted in a marked enrichment of NB spheroids with GD2-high, which regrew as 2D-adherent cells after re-seeding into regular culture plate, and retained the GD2-high and ST8SIA1-high ADRN phenotype for several months. In contrast, the NB adherent cells cultured in parallel without ULA-selection showed predominant GD2-low, ST8SIA1-low and vimentin (VIM)-high MES-like phenotype as characterized by GD2 flow and Real-time quantitative PCR of ADRN and MES marker gene expression. Our novel primary cell culture conditions allows long term in vitro spheroid growth of patient-derived NB cells from BM in regular culture plate, which is scaffold-free, faster, less expensive, less labor intensive, and mimics the in vivo NB cell clusters or aggregates seen in NB patient’s BM aspirates with NB infiltration. Our culture conditions in combination with the 3D ULA-selection strategy enabled us to establish paired ADRN and MES-like NB sublines from two primary NB tumors derived from adrenal and BM sites. These patient-matched, paired NB cell lines in ADRN and MES-like cell states will be useful to study NB lineage specific biology and implications of cell states on an individual patient’s response to targeted immunotherapy. Min Huang, Robbie G. Majzner, Nathan Chiang, Alejandro Solis, Bill Chiu, Serena Tan, Emon Nasajpour, Kathleen M. Sakamoto, Norman J. Lacayo, Claudia K. Petritsch, Sheri L. Spunt, Raya Saab. Novel scaffold free method to establish 3D spheroid and 2D adherent primary neuroblastoma cell lines with adrenergic and mesenchymal-like phenotypes [abstract]. In: Proceedings of the American Association for Cancer Research Annual Meeting 2025; Part 1 (Regular Abstracts); 2025 Apr 25-30; Chicago, IL. Philadelphia (PA): AACR; Cancer Res 2025;85(8_Suppl_1):Abstract nr 3950.

Background: Hereditary hemorrhagic telangiectasia (HHT) and hereditary pulmonary arterial hypertension (HPAH) are genetic diseases that affect the pulmonary vasculature. HHT and HPAH are due to a haploinsufficiency in components of the bone morphogenetic protein receptor type 2 (BMPR2) pathway. Despite shared genetics, HHT and HPAH cause different pulmonary vascular lesions. In HHT, pulmonary arteriovenous malformations (pAVMs) can occur. These are abnormal shunts between arteries and veins that can lead to stroke. HPAH is characterized by extensive remodeling of the lung including the formation of plexiform lesions, convolutes of vascular channels that were described as a pathological hallmark of PAH. The pathobiology of pAVMs and plexiform lesions is incompletely understood. Recent studies suggest that a local bi-allelic loss of HHT causing genes in clonally expanding endothelial cells (ECs) might be required for AVMs to form in patients with HHT. In plexiform lesions, clonal EC expansion was also described. Hypothesis: We hypothesized that local somatic mutations in ECs might be involved in the pathogenesis of pulmonary vascular lesions in HHT and HPAH. Aims: We here aimed at detecting somatic mutations in pulmonary vascular lesions of a patient with HHT and end-stage PAH caused by a mutation in ENG . Methods: Targeted deep sequencing of 3 HHT causing genes and 11 vascular malformation associated genes was performed on 4 pAVMs and 14 plexiform lesions of the patient. Results: The disease-causing germline mutation in ENG was detected in every sample. No somatic mutation in the functional allele of ENG was detected in the pulmonary vascular lesions. However, we identified a somatic mutation in the gene encoding for Phosphatidylinositol-4,5-Bisphosphate 3-Kinase Catalytic Alpha ( PIK3CA) in one of the plexiform lesions. This mutation is a confirmed activating somatic mutation in the Catalogue Of Somatic Mutations In Cancer that was previously functionally confirmed as a moderately potent oncogenic mutation. Conclusion and Outlook: We here describe a rare case of an ENG mutation carrier with HHT and HPAH. We identified a somatic activating mutation in PIK3CA in one of her plexiform lesions. To explore if the mutation contributes to the overgrowth of ECs in a plexiform lesion on a background of a haploinsufficiency in ENG , we are performing functional studies on iPSC-derived ECs from this patient after introduction of the mutation in PIK3CA by Crispr/Cas9.

In the United States, approximately one in 1000 children are diagnosed with the autoinflammatory disease, Juvenile Idiopathic Arthritis (JIA). A subset of JIA cases manifests as Systemic JIA (sJIA), which is characterized by joint pain, fevers, rashes, and systemic inflammation. Severe pulmonary complications have not historically been associated with sJIA. Since 2010, inhibitors of interleukin-1 and interleukin 6 (IL-1i/IL-6i) are the recommended course of treatment for sJIA, yet recently studies show evidence of a severe drug hypersensitivity reaction implicating these medications in a subset of those treated. With this reaction, sJIA patients can develop severe lung disease, including pulmonary alveolar proteinosis (PAP). As this drug-associated lung disease has only recently been identified, the etiology of sJIA drug-associated PAP (sJIA-daPAP) is poorly understood. We used multiplexed ion beam imaging by time-of-flight (MIBI-TOF) to define the cellular immune infiltrate and describe pathological features of PAP in sJIA-daPAP patients. We found an enrichment of eosinophils, neutrophils, and M2 macrophages within regions of lipoproteinosis. These enriched subsets all upregulate IFNγ within lipoproteinosis, a signature specific to sJIA-daPAP samples compared to non-sJIA-PAP samples. In a cellular neighborhood analysis, we identified that eosinophils, neutrophils, and M2 macrophages frequently co-localize within the same cellular microenvironment, especially in lipoproteinosis regions. Therefore, this spatial coordination may be involved in clearance or persistence of lipoproteinosis in sJIA-daPAP. This study provides a comprehensive overview of sJIA-daPAP immune pathology and suggests cellular mechanisms that drive inflammation in sJIA patients experiencing pulmonary complications associated with delayed drug hypersensitivity during IL-1i/IL-6i treatment. ### Competing Interest Statement M.A. is an inventor on patent US20150287578A1, which covers the mass spectrometry approach utilized by MIBI-TOF to detect elemental reporters in tissue using secondary ion mass spectrometry. M.A. is a board member and shareholder in IonPath, which develops and manufactures the commercial MIBI-TOF platform. The remaining authors declare no competing interests.

Neuroblastoma is one of the most common tumors in young children, arising from the adrenal medulla or paraspinal sympathetic ganglia. We describe primitive round cell tumors presenting in three patients less than 1.5 years old, with striking clinical and pathologic similarities to neuroblastoma. Unlike neuroblastoma, however, these primitive tumors did not show specific histologic or immunophenotypic evidence of neuroblastic differentiation, and harbored a MN1::ZNF341 fusion. All patients progressed through neuroblastoma therapy and ultimately died of disease. These highly aggressive tumors mimicking neuroblastoma appear to be a novel and distinctive entity in need of further characterization.

Perivascular epithelioid cell tumors (PEComas) are a heterogenous group of mesenchymal neoplasms with a mixed myomelanocytic immunophenotype. PEComa-family tumors include angiomyolipoma, lymphangioleiomyomatosis, and a large category of rare neoplasms throughout the body that are now classified under the umbrella term "PEComa." This review focuses on recent advances in the clinicopathological and molecular features of PEComas, with an emphasis on PEComas that originate in soft tissue.

We describe the first cases of pediatric melanoma with ALK fusion gene arising within giant congenital melanocytic nevi. Two newborn boys presented with large pigmented nodular plaques and numerous smaller satellite nevi. Additional expansile nodules developed within both nevi and invasive melanomas were diagnosed before 10 months of age in both boys. Oncogenic driver mutations in NRAS and BRAF were absent in both cases. Instead, oncogenic ZEB2::ALK fusion genes were identified in both the nevus and melanoma developing within the nevus. In both cases, tumors were noted by ultrasound in utero, demonstrated significant nodularity at birth, and progressed to melanoma in the first year of life suggesting that congenital nevi with ALK fusion genes may behave more aggressively than those with other mutations. As ALK kinase inhibitors are effective against a range of tumors with similar ALK fusion kinases, identifying ALK fusion genes in congenital melanocytic nevi may provide an opportunity for targeted therapy.

Context.— Perivascular epithelioid cell tumors (PEComas) are rare mesenchymal tumors of uncertain histogenesis expressing smooth muscle and melanocytic markers. The clinicopathologic spectrum in young patients is not well documented. Objective.— To describe a multi-institutional series of PEComas in children, adolescents, and young adults. Design.— PEComas, not otherwise specified (NOS); angiomyolipomas (AMLs); lymphangioleiomyomatosis; and clear cell sugar tumors were retrospectively identified from 6 institutions and the authors’ files. Results.— Seventy PEComas in 64 patients (median age, 15 years) were identified. They were more common in females (45 of 64 patients), occurring predominantly in the kidney (53 of 70), followed by the liver (6 of 70). Thirty-four patients had confirmed tuberous sclerosis complex (TSC), 3 suspected TSC mosaicism, 2 Li-Fraumeni syndrome (LFS) and 1 neurofibromatosis type 1. Most common variants were classic (49 of 70) and epithelioid (8 of 70) AML. Among patients with AMLs, most (34 of 47) had TSC, and more TSC patients had multiple AMLs (15 of 36) than non-TSC patients (2 of 13). Two TSC patients developed malignant transformation of classic AMLs: 1 angiosarcomatous and 1 malignant epithelioid. Lymphangioleiomyomatosis (5 of 70) occurred in females only, usually in the TSC context (4 of 5). PEComas-NOS (6 of 70) occurred exclusively in non-TSC patients, 2 of whom had LFS (2 of 6). Three were malignant, 1 had uncertain malignant potential, and 2 were benign. All 4 PEComas-NOS in non-LFS patients had TFE3 rearrangements. Conclusions.— Compared to the general population, TSC was more prevalent in our cohort; PEComas-NOS showed more frequent TFE3 rearrangements and possible association with LFS. This series expands the spectrum of PEComas in young patients and demonstrates molecular features and germline contexts that set them apart from older patients.

Context.— Pediatric soft tissue tumors are one of the areas of pediatric pathology that frequently generate consult requests. Evolving classification systems, ancillary testing methods, new treatment options, research enrollment opportunities, and tissue archival processes create additional complexity in handling these unique specimens. Pathologists are at the heart of this critical decision-making, balancing responsibilities to consider expediency, accessibility, and cost-effectiveness of ancillary testing during pathologic examination and reporting. Objective.— To provide a practical approach to handling pediatric soft tissue tumor specimens, including volume considerations, immunohistochemical staining panel recommendations, genetic and molecular testing approaches, and other processes that impact the quality and efficiency of tumor tissue triage. Data Sources.— The World Health Organization Classification of Soft Tissue and Bone Tumors, 5th edition, other recent literature investigating tissue handling, and the collective clinical experience of the group are used in this manuscript. Conclusions.— Pediatric soft tissue tumors can be difficult to diagnose, and evaluation can be improved by adopting a thoughtful, algorithmic approach to maximize available tissue and minimize time to diagnosis.

Typical high-throughput single-cell RNA-sequencing (scRNA-seq) analyses are primarily conducted by (pseudo)alignment, through the lens of annotated gene models, and aimed at detecting differential gene expression. This misses diversity generated by other mechanisms that diversify the transcriptome such as splicing and V(D)J recombination, and is blind to sequences missing from imperfect reference genomes. Here, we present sc-SPLASH, a highly efficient pipeline that extends our SPLASH framework for statistics-first, reference-free discovery to barcoded scRNA-seq (10x Chromium) and spatial transcriptomics (10x Visium); we also provide its optimized module for preprocessing and k-mer counting in barcoded data, BKC, as a standalone tool. sc-SPLASH rediscovers known biology including V(D)J recombination and cell-type-specific alternative splicing in human and trans-splicing in tunicate (Ciona) and when applied to spatial datasets, detects sequence variation including tumor-specific somatic mutation. In sponge (Spongilla) and tunicate (Ciona), we uncover secreted repeat proteins expressed in immune-type cells and regulated during development; the sponge genes were absent from the reference assembly. sc-SPLASH provides a powerful alternative tool for exploring transcriptomes that is applicable to the breadth of life's diversity.

Tissue-selective chemoattractants direct lymphocytes to epithelial surfaces to establish local immune environments, regulate immune responses to food antigens and commensal organisms, and protect from pathogens. Homeostatic chemoattractants for small intestines, colon and skin are known1,2, but chemotropic mechanisms selective for respiratory tract and other non-intestinal mucosal tissues remain poorly understood. Here we leveraged diverse omics datasets to identify GPR25 as a lymphocyte receptor for CXCL17, a chemoattractant cytokine whose expression by epithelial cells of airways, upper gastrointestinal and squamous mucosae unifies the non-intestinal mucosal tissues and distinguishes them from intestinal mucosae. Single-cell transcriptomic analyses show that GPR25 is induced on innate lymphocytes before emigration to the periphery, and is imprinted in secondary lymphoid tissues on activated B and T cells responding to immune challenge. GPR25 characterizes B and T tissue resident memory cells and regulatory T lymphocytes in non-intestinal mucosal tissues and lungs in humans and mediates lymphocyte homing to barrier epithelia of the airways, oral cavity, stomach, and biliary and genitourinary tracts in mouse models. GPR25 is also expressed by T cells in cerebrospinal fluid and CXCL17 by neurons, suggesting a role in central nervous system (CNS) immune regulation. We reveal widespread imprinting of GPR25 on regulatory T cells, suggesting a mechanistic link to population genetics evidence that GPR25 is protective in autoimmunity3,4. Our results define a GPR25-CXCL17 chemoaffinity axis with the potential to integrate immunity and tolerance at non-intestinal mucosae and the CNS.

Bietti crystalline dystrophy (BCD) is a rare heritable retinal disease characterized by crystal deposition primarily in the retina. It is associated with atrophy of the retinal pigment epithelium (RPE) and is caused by variants in CYP4V2 , which encodes a cytochrome P450 hemethiolate protein superfamily member. CYP4V2 is involved in the selective hydrolysis of saturated medium chain fatty acids, and patients with BCD demonstrate abnormalities in fatty acid metabolism, including abnormal lipid profiles and the accumulation of the pathogenic crystals within the RPE, which leads to the visual pathologies characteristic of BCD. However, the precise identity of the crystals is currently unknown, and BCD has no established extraocular manifestations. Here, we report granulomatous hepatitis associated with abundant diffuse crystalline clefts in the hepatic parenchyma in 3 patients with retinal dystrophy and dyslipidemia: 2 with pathogenic CYP4V2 variants and 1 patient with clinical ophthalmologic findings suggestive of BCD but without available genetic testing. The unique and striking histologic features unifying the liver biopsies in all 3 patients strongly support a process related to abnormal fatty acid metabolism underlying the genetic disease of BCD, expanding the spectrum of BCD and shedding light on the importance of CYP4V2 in systemic fatty acid metabolism.

Most pediatric cancers have a low incidence of actionable somatic mutations. Here we examine the clinical utility of incorporating comparative analysis of RNA expression (CARE) into the molecular workup of recurrent/refractory and rare pediatric tumors. Patients treated at Stanford Medicine Children's Health (n=33) with a recurrent/refractory or rare pediatric solid tumor underwent tumor RNA sequencing (RNA-seq) analysis and standard-of-care tumor DNA profiling. The Treehouse Childhood Cancer Initiative compared each patient's tumor RNA-seq profile with over 11,000 uniformly analyzed tumor profiles from public data repositories. These comparisons reveal candidate cancer genes and pathways that represent potential therapeutic targets. Thirty-three patients underwent tumor RNA-seq and CARE analysis, which was potentially useful for 31 of 33 (94%) patients, identified new treatments for 5 of 31 patients, and produced a definitive clinical response in 3 of 5 patients treated with an identified therapy. The new treatments would not have been considered by the clinical team without the CARE analysis. In comparison, DNA mutations alone were potentially useful for treatment identification in only 15 of 28 (54%) tumors for which mutation data were available. CARE analysis may identify additional cancer driver pathways and druggable targets in patients with rare or difficult-to-treat pediatric cancers relative to standard-of-care DNA profiling. This study highlights the clinical utility of RNA profiling of pediatric tumors and underscores the need for further evaluation of this approach to improve patient outcomes. Most pediatric cancers have a low incidence of actionable somatic mutations. Here we examine the clinical utility of incorporating comparative analysis of RNA expression (CARE) into the molecular workup of recurrent/refractory and rare pediatric tumors. Patients treated at Stanford Medicine Children's Health (n=33) with a recurrent/refractory or rare pediatric solid tumor underwent tumor RNA sequencing (RNA-seq) analysis and standard-of-care tumor DNA profiling. The Treehouse Childhood Cancer Initiative compared each patient's tumor RNA-seq profile with over 11,000 uniformly analyzed tumor profiles from public data repositories. These comparisons reveal candidate cancer genes and pathways that represent potential therapeutic targets. Thirty-three patients underwent tumor RNA-seq and CARE analysis, which was potentially useful for 31 of 33 (94%) patients, identified new treatments for 5 of 31 patients, and produced a definitive clinical response in 3 of 5 patients treated with an identified therapy. The new treatments would not have been considered by the clinical team without the CARE analysis. In comparison, DNA mutations alone were potentially useful for treatment identification in only 15 of 28 (54%) tumors for which mutation data were available. CARE analysis may identify additional cancer driver pathways and druggable targets in patients with rare or difficult-to-treat pediatric cancers relative to standard-of-care DNA profiling. This study highlights the clinical utility of RNA profiling of pediatric tumors and underscores the need for further evaluation of this approach to improve patient outcomes.

Gastrointestinal manifestations of hemolytic uremic syndrome (HUS) are rare in pediatrics, but can have significant impact on the course of the disease. While various infectious etiologies are associated with HUS, Enterohemorrhagic Escherichia coli (EHEC) has been a focus of interest in its role in post-diarrheal HUS. We report a previously healthy 3-year-old boy who presented with bloody diarrhea, was found to be EHEC positive, and developed gastrointestinal complications of HUS including chronic colitis and strictures. The case illustrates that, though rare, HUS can have long-term gastrointestinal effects.

In mammalian lungs gas exchange occurs in thin-walled air sacs called alveoli, which are surrounded by a dense mesh of capillaries. Defects in patterning, maintenance or repair of alveoli lead to diseases that compromise gas exchange, including chronic diseases such as bronchopulmonary dysplasia, pulmonary fibrosis and chronic obstructive pulmonary disease, as well as the acute respiratory distress syndromes accompanying severe alveolar injury or virus-induced damage, as in Covid-19. Despite the tremendous disease burden and the urgent need for therapies, the mechanisms that establish and maintain the pattern and architecture of alveoli are not well understood. Here we use mosaic genetic labeling, single-cell RNA-sequencing and high-resolution deep imaging to elucidate the three-dimensional structure and cellular composition of alveoli. We show that an alveolus in the mouse lung is composed of 10-15 cells of seven different types, each with a remarkable, distinctive structure. Two of them are intermingled capillary cell types with complex 'swiss cheese' morphologies and distinct functions. One cell type that we name the 'aerocyte' is specialized for gas exchange and unique to the lung. The other cell type, termed 'general capillary', is specialized to regulate vasomotor tone and functions as a progenitor cell in capillary maintenance and repair. By mapping alveolar development at single-cell resolution at a defined position in the lung, we find that alveoli form surprisingly early by budding of epithelial cells out from the airway stalk between enwrapping smooth muscle cells that rearrange into a ring of myofibroblasts at the alveolar entrance. Our analysis suggests a novel mechanism of alveolar formation and provides the foundation for investigations of the structure, function and maintenance of the gas exchange surface in health, disease, aging and evolution.