Models of structure formation with a cosmological constant Lambda prov
ide a good fit to the observed power spectrum of galaxy clustering. Ho
wever, they suffer from several problems. Theoretically, it is difficu
lt to understand why the cosmological constant is so small in Planck u
nits. Observationally, while the power spectra of cold dark matter plu
s Lambda models have approximately the right shape, the COBE-normalize
d amplitude for a scale-invariant spectrum is too high, requiring gala
xies to be antibiased relative to the mass distribution. Attempts to a
ddress the first problem have led to models in which a dynamical field
supplies the vacuum energy, which is thereby determined by fundamenta
l physics scales. We explore the implications of such dynamical Lambda
models for the formation of large-scale structure. We find that there
are dynamical models for which the amplitude of the COPE-normalized s
pectrum matches the observations. We also calculate the cosmic microwa
ve background anisotropies in these models and show that the angular p
ower spectra are distinguishable from those of standard cosmological c
onstant models.