Embryonic development of the respiratory system is regulated by a series of mesenchymal-epithelial interactions that are only partially understood. Mesenchymal FGF and Wnt2/Wnt2b signaling are implicated in specification of mammalian pulmonary progenitors from the ventral foregut endoderm, but their epistatic relationship and downstream targets are largely unknown. In addition, how wnt2 and wnt2b are regulated in the developing foregut mesenchyme is unknown. We show that the Odd-skipped-related (Osr) zinc-finger transcriptional repressors Osr1 and Osr2 are redundantly required for Xenopus lung specification in a molecular pathway linking foregut pattering by FGFs to Wnt-mediated lung specification and RA-regulated lung bud growth. FGF and RA signals are required for robust osr1 and osr2 expression in the foregut endoderm and surrounding lateral plate mesoderm (lpm) prior to respiratory specification. Depletion of both Osr1 and Osr2 (Osr1/Osr2) results in agenesis of the lungs, trachea and esophagus. The foregut lpm of Osr1/Osr2-depleted embryos fails to express wnt2, wnt2b and raldh2, and consequently Nkx2.1(+) progenitors are not specified. Our data suggest that Osr1/Osr2 normally repress bmp4 expression in the lpm, and that BMP signaling negatively regulates the wnt2b domain. These results significantly advance our understanding of early lung development and may impact strategies to differentiate respiratory tissue from stem cells.