We present a method for lung cancer detection exploiting reflectance spectra measured in vivo during endoscopic imaging of the lung. The measured reflectance spectra were analyzed using a specially developed light-transport model to obtain quantitative information about cancer-related, physiological, and morphologic changes in the superficial bronchial mucosa layers. The light-transport model allowed us to obtain the absorption coefficient and further to derive the micro-vascular blood volume fraction in tissue and the tissue blood oxygen saturation. The model also allowed us to obtain the scattering coefficient and the anisotropy coefficient and further to derive the tissue scattering micro-particle volume fraction and size distribution. The specular component of the reflectance signal and the instrument response were accounted for during the analysis. The method was validated using 100 reflectance spectra measured in vivo in a noncontact fashion from 22 lung patients (50 normal tissue/benign lesion sites and 50 malignant lesion sites). The classification between normal tissue/benign lesions and malignant lesions was further investigated using the derived quantitative parameters and discriminant function analysis. The results demonstrated significant differences between the normal tissue/benign lesions and the malignant lesions in terms of tissue blood volume fraction, blood oxygen saturation, tissue scatterer volume fractions, and size distribution. The results also showed that the malignant lung lesions can be differentiated from normal tissue/benign lesions with both diagnostic sensitivity and specificity of better than 80%.