The amiloride-sensitive Na(+) channel ENaC is expressed in lung epithelium and plays a pivotal role in lung fluid clearance in the newborn. Multiple splice variants of the ENaC alpha-subunit have been reported. Among them, alpha-ENaC2 accounts for a considerable portion of alpha-ENaC transcripts in human lung and kidney, possesses channel functions similar to alpha-ENaC1, and is driven by a downstream promoter. In the current study, we examine the regulation of alpha-ENaC2 transcription in lung epithelial cells. We found that transcription factors Sp1 and Sp3 activate alpha-ENaC2 transcription through a GC-rich element (Sp1-binding site) in the promoter. Because alpha-ENaC expression and Sp1 phosphorylation are both significantly up-regulated in the perinatal lung, we then examined the possible connection between Sp1/Sp3 phosphorylation and alpha-ENaC2 expression. We found that protein phosphatase 1 (PP1) dephosphorylates Sp1 and Sp3 in lung epithelial cells, reduces their binding to the alpha-ENaC2 promoter, and decreases Sp1/Sp3-mediated promoter activity. Our results suggest that Sp1 and Sp3 are essential for alpha-ENaC2 transcription in lung epithelial cells and that dephosphorylation of the Sp transcription factors by PP1 suppresses alpha-ENaC2 expression. The significance of these findings in the regulation of gene expression in perinatal lung is discussed.