Pulmonary hypoplasia associated with congenital diaphragmatic hernia (CDH) remains a major therapeutic problem. Moreover, the pathogenesis of pulmonary hypoplasia in case of CDH is controversial. In particular, little is known about early lung development in this anomaly. To investigate lung development separate from diaphragm development we used an in vitro modification of the 2, 4-dichlorophenyl-p-nitrophenylether (Nitrofen) animal model for CDH. This enabled us to investigate the direct effects of Nitrofen on early lung development and branching morphogenesis in an organotypic explant system without the influence of impaired diaphragm development. Epithelial cell differentiation of the lung explants was assessed using surfactant protein-C and Clara cell secretory protein-10 mRNA expression as markers. Furthermore, cell proliferation and apoptosis were investigated. Our results indicate that Nitrofen negatively influences branching morphogenesis of the lung. Initial lung anlage formation is not affected. In addition, epithelial cell differentiation and cell proliferation are attenuated in lungs exposed to Nitrofen. These data indicate that Nitrofen interferes with early lung development before and separate from (aberrant) diaphragm development. Therefore, we postulate the dual-hit hypothesis, which explains pulmonary hypoplasia in CDH by two insults, one affecting both lungs before diaphragm development and one affecting the ipsilateral lung after defective diaphragm development.