Abstract Background By altering specific developmental signaling pathways that are necessary for fetal lung development, perinatal nicotine exposure affects lung growth and differentiation, resulting in the offsprings' predisposition to childhood asthma; peroxisome proliferator-activated receptor gamma (PPARγ) agonists can inhibit this effect. However, whether the perinatal nicotine-induced asthma risk is restricted to nicotine-exposed offspring only; whether it can be transmitted to the next generation; and whether PPARγ agonists would have any effect on this process are not known. Methods Time-mated Sprague Dawley rat dams received either placebo or nicotine (1 mg/kg, s.c.), once daily from day 6 of gestation to postnatal day (PND) 21. Following delivery, at PND21, generation 1 (F1) pups were either subjected to pulmonary function tests, or killed to obtain their lungs, tracheas, and gonads to determine the relevant protein markers (mesenchymal contractile proteins), global DNA methylation, histone 3 and 4 acetylation, and for tracheal tension studies. Some F1 animals were used as breeders to generate F2 pups, but without any exposure to nicotine in the F1 pregnancy. At PND21, F2 pups underwent studies similar to those performed on F1 pups. Results Consistent with the asthma phenotype, nicotine affected lung function in both male and female F1 and F2 offspring (maximal 250% increase in total respiratory system resistance, and 84% maximal decrease in dynamic compliance following methacholine challenge; P < 0.01, nicotine versus control; P < 0.05, males versus females; and P > 0.05, F1 versus F2), but only affected tracheal constriction in males (51% maximal increase in tracheal constriction following acetylcholine challenge, P < 0.01, nicotine versus control; P < 0.0001, males versus females; P > 0.05, F1 versus F2); nicotine also increased the contractile protein content of whole lung (180% increase in fibronectin protein levels, P < 0.01, nicotine versus control, and P < 0.05, males versus females) and isolated lung fibroblasts (for example, 45% increase in fibronectin protein levels, P < 0.05, nicotine versus control), along with decreased PPARγ expression (30% decrease, P < 0.05, nicotine versus control), but only affected contractile proteins in the male trachea (P < 0.05, nicotine versus control, and P < 0.0001, males versus females). All of the nicotine-induced changes in the lung and gonad DNA methylation and histone 3 and 4 acetylation were normalized by the PPARγ agonist rosiglitazone except for the histone 4 acetylation in the lung. Conclusions Germline epigenetic marks imposed by exposure to nicotine during pregnancy can become permanently programmed and transferred through the germline to subsequent generations, a ground-breaking finding that shifts the current asthma paradigm, opening up many new avenues to explore.