The IGF axis has been implicated in the risk of various cancers. We previously reported a potential role of tissue-derived IGF in lung tumor formation and progression. However, the role of IGF-binding protein (IGFBP)-3, a major IGFBP, on the activity of tissue-driven IGF in lung cancer development is largely unknown. Here, we show that IGF-I, but not IGF-II, protein levels in non-small-cell lung cancer (NSCLC) were significantly higher than those in normal and hyperplastic bronchial epithelium. We found that IGF-I and IGFBP-3 levels in NSCLC tissue specimens were significantly correlated with phosphorylated IGF-IR (pIGF-IR) expression. We investigated the impact of IGFBP-3 expression on the activity of tissue-driven IGF-I in lung cancer development using mice carrying lung-specific human IGF-I transgene (Tg), a germline-null mutation of IGFBP-3, or both. Compared with wild-type (BP3(+/+)) mice, mice carrying heterozygous (BP3(+/-)) or homozygous (BP3(-/-)) deletion of IGFBP-3 alleles exhibited decreases in circulating IGFBP-3 and IGF-I. Unexpectedly, IGF(Tg) mice with 50% of physiological IGFBP-3 (BP3(+/-); IGF(Tg)) showed higher levels of pIGF-IR/IR and a greater degree of spontaneous or tobacco carcinogen [4-(methylnitrosamino)-1-(3-pyridyl)-1-butanone]-induced lung tumor development and progression than did the IGF(Tg) mice with normal (BP3(+/+;) IGF(Tg)) or homozygous deletion of IGFBP-3 (BP3(-/-); IGF(Tg)). These data show that IGF-I is overexpressed in NSCLC, leading to activation of IGF-IR, and that IGFBP-3, depending on its expression level, either inhibits or potentiates IGF-I actions in lung carcinogenesis.