Proteolytic processing of surfactant protein C (SP-C) proprotein in multivesicular bodies of alveolar type II cells results in a 35-residue mature peptide, consisting of a transmembrane domain and a 10-residue extramembrane domain. SP-C mature peptide is stored in lamellar bodies (a lysosomal-like organelle) and secreted with surfactant phospholipids into the alveolar space. This study was designed to identify the peptide domain of SP-C required for sorting and secretion of this integral membrane peptide. Deletion analyses in transiently transfected PC12 cells and isolated mouse type II cells suggested the extramembrane domain of mature SP-C was cytosolic and sufficient for sorting to the regulated secretory pathway. Intratracheal injection of adenovirus encoding SP-C mature peptide resulted in secretion into the alveolar space of wild type mice but not SP-C (-/-) mice. SP-C secretion in null mice was restored by the addition of the N-terminal propeptide. The cytosolic domain, consisting of the N- terminal propeptide and extramembrane domain of mature SP-C peptide, supported secretion of the transmembrane domain of platelet-derived growth factor receptor. Collectively, these studies indicate that the N-terminal propeptide of SP-C is required for intracellular sorting and secretion of SP-C.