Embryonic lungs were obtained from embryonic day 13.5 ICR mice. The lung-tip epithelium isolated using dispase treatment was embedded in low-growth factor Matrigel, cultured in DMEM/F12 medium containing 0.1% bovine serum albumin, supplemented with insulin, transferrin, and selenium (ITS), with or without fibroblast growth factor 7 (FGF7), and were observed for 14 days. With the addition of FGF7, the tip epithelium grew to form a cyst by culture day 7. Then, tubular tufts-like alveolus appeared around the cyst surface. Reverse transcription-polymerase chain reaction revealed that, with the addition of FGF7, the cultured lung explants expressed alveolar-type 1 cell markers, such as HopX and Aquaporin5, and type 2 cell markers, such as Lamp3 and Surfactant apoproteins (Sftp) C and D. Paraffin-embedded sections were stained with hematoxylin and eosin, and alveolar structures at culture day 14 were composed of squamous and cuboidal epithelial cells. Immunohistochemical studies showed that the squamous epithelial cells were positive for HopX, and the cuboidal epithelial cells were positive for pro-SftpC. Furthermore, transmission electron microscopic observation confirmed that the squamous epithelial cells were alveolar-type 1 cells and the cuboidal cells were type 2 cells, because they had many lamellar inclusion bodies. Embryonic lung-tip epithelium forms an alveolus-like organoid through the self organization with the aid of Matrigel, ITS, and FGF7. This method to make alveolus-like organoid in vitro is easy, reproducible, and economical. This method could have potential to solve many issues in alveolar epithelial cells in normal and pathological conditions.