There is increasing evidence that vitamin A deficiency in utero correlates with abnormal airway smooth muscle (SM) function in postnatal life. The bioactive vitamin A metabolite retinoic acid (RA) is essential for formation of the lung primordium; however, little is known about the impact of early fetal RA deficiency on postnatal lung structure and function. Here, we provide evidence that during murine lung development, endogenous RA has a key role in restricting the airway SM differentiation program during airway formation. Using murine models of pharmacological, genetic, and dietary vitamin A/RA deficiency, we found that disruption of RA signaling during embryonic development consistently resulted in an altered airway SM phenotype with markedly increased expression of SM markers. The aberrant phenotype persisted postnatally regardless of the adult vitamin A status and manifested as structural changes in the bronchial SM and hyperresponsiveness of the airway without evidence of inflammation. Our data reveal a role for endogenous RA signaling in restricting SM differentiation and preventing precocious and excessive SM differentiation when airways are forming.