The platelet-derived growth factor alpha-receptor (PDGFRalpha) plays a vital role in the development of vertebrate embryos, since mice lacking PDGFRalpha die in mid-gestation. PDGFRalpha is expressed in several types of migratory progenitor cells in the embryo including cranial neural crest cells, lung smooth muscle progenitors and oligodendrocyte progenitors. To study PDGFRalpha gene regulation and function during development, we generated transgenic mice by pronuclear injection of a 380 kb yeast artificial chromosome (YAC) containing the human PDGFRalpha gene. The YAC transgene was expressed in neural crest cells, rescued the profound craniofacial abnormalities and spina bifida observed in PDGFRalpha knockout mice and prolonged survival until birth. The ultimate cause of death was respiratory failure due to a defect in lung growth, stemming from failure of the transgene to be expressed correctly in lung smooth muscle progenitors. However, the YAC transgene was expressed faithfully in oligodendrocyte progenitors, which was not previously observed with plasmid-based transgenes containing only upstream PDGFRalpha control sequences. Our data illustrate the complexity of PDGFRalpha genetic control, provide clues to the location of critical regulatory elements and reveal a requirement for PDGF signalling in prenatal lung growth, which is distinct from the known requirement in postnatal alveogenesis. In addition, we found that the YAC transgene did not prolong survival of Patch mutant mice, indicating that genetic defects outside the PDGFRalpha locus contribute to the early embryonic lethality of Patch mice.