Introduction: Fetal intervention aims to improve lung growth and survival in congenital diaphragmatic hernia (CDH). Airway smooth muscle (ASM) is important in lung development: ASM progenitors produce a key growth factor for lung morphogenesis (fibroblast growth factor 10); ASM contractility is also coupled to growth. ASM hyperreactivity occurs in postnatal CDH and may exacerbate barotrauma via impaired lung compliance. We hypothesise ASM hyperreactivity and its sequelae are based on an early developmental lesion of ASM activity in hypoplastic lung. Methods: Sprague-Dawley rats were fed 100mg nitrofen on day 9.5 of pregnancy to induce lung hypoplasia in offspring (controls had vehicle alone). Normal and hypoplastic lung primordia were cultured from day 13.5 of gestation at 37oC in 5% CO₂ and loaded at 54 or 78 hours with Ca²⁺ sensitive indicators: Fluo-4 for confocal imaging and Indo-1 or Fura-2 for photometric measurements of [Ca²⁺]_i. Results: Hypoplastic lung features spontaneous propagating ASM Ca²⁺ transients with reduced frequency, increased amplitude and significantly prolonged plateau duration, relative to control lung. Nonetheless, hypoplastic lung exhibits normal requirement for extracellular calcium entry and intracellular calcium release in initiation and regulation of ASM Ca²⁺ waves. Conclusions: Early ASM dysfunction in lung hypoplasia is apparent as specific anomalies of Ca²⁺ transients that indicate a problem with plasmalemmal ion channels / action potential generation. Elucidation of such an ASM lesion may allow pharmacological amelioration not only of ASM hyperreactivity and its sequelae, but also of hypoplastic lung growth itself.