We have succeeded in developing hollow branching structure in vitro commonly observed in lung airway using primary lung airway epithelial cells. Cell concentration gradient is the key factor that determines production of the branching cellular structures, as optimization of this component removes the need for heterotypic culture. The higher cell concentration leads to the more production of morphogens and increases the growth rate of cells. However, homogeneous high cell concentration does not make a branching structure. Branching requires sufficient space in which cells can grow from a high concentration toward a low concentration. Simulation performed using a reaction-diffusion model revealed that long-range inhibition prevents cells from branching when they are homogeneously spread in culture environments, while short-range activation from neighboring cells leads to positive feedback. Thus, a high cell concentration gradient is required to make branching structures. Spatial distributions of morphogens, such as BMP-4, play important roles in the pattern formation. This simple yet robust system provides an optimal platform for the further study and understanding of branching mechanisms in the lung airway, and will facilitate chemical and genetic studies of lung morphogenesis programs.