Congenital Diaphragmatic Hernia (CDH) is a congenital disorder with an incidence of 1 in 2500 live births. Respiratory distress of newborns with CDH is the result of pulmonary hypoplasia and pulmonary hypertension. Hypoplastic lungs are characterized by a decreased number of airways with smaller airspaces, whereas the combination of a decreased number of vascular branches and an increased adventitia and medial thickness of the pulmonary arterial walls result in pulmonary hypertension. The appearance of the CDH lungs suggests that its complete formation is stalled during development. Understanding the basic mechanisms of lung development is mandatory to unravel the origin of CDH. Although the histological abnormalities in CDH lungs have been well described, less is known about the underlying molecular mechanisms. In this review we will discuss the current molecular and genetic background of lung formation, as well as a reflection of this knowledge towards CDH.