We investigated regulation of vascular endothelial growth factor (VEGF) expression by hypoxia in cultured and freshly isolated rat alveolar epithelial cells (AEC). In vitro, hypoxia increased VEGF mRNA and protein levels, with maximal stimulation at 0% O2 for 18 h. A similar upregulation of VEGF expression was found in alveolar epithelial type II (ATII) cells freshly isolated from rats exposed to 8% O2 for 24 h. In vitro, hypoxia-induced upregulation of VEGF mRNA was due to an increase in transcription, rather than an increase in RNA stability, inasmuch as the half-life of VEGF mRNA was unchanged. Upregulation of VEGF mRNA by hypoxia was mimicked by CoCl2 and desferrioxamine in normoxic AEC and was not prevented by inhibitors of reactive oxygen species, suggesting that hypoxic VEGF regulation involved an O2-dependent protein that requires ferrous ions but is independent of reactive oxygen species generation. In polarized ATII cells, VEGF protein was secreted at the apical and basolateral sides. Similarly, in rats, VEGF was secreted in bronchoalveolar lavage fluid. Hypoxia induced a twofold increase in VEGF protein at the apical side of ATII cells in culture and in bronchoalveolar lavage fluid. These findings suggest that release of VEGF synthesized by AEC may target not only endothelial cells but also other alveolar cells, including macrophages and epithelial cells.