Mutations in the surfactant protein (SP)-C gene are responsible for familial and sporadic interstitial lung disease (ILD). The consequences of such mutations on pulmonary surfactant composition and function are poorly understood. To determine the effects of a mutation in the SP-C gene on surfactant, we obtained lung tissue at the time of transplantation from a 14-mo-old infant with progressive ILD. An in-frame 9-bp deletion spanning codons 91-93 in Exon 3 of the SP-C gene was present on one allele; neither parent carried this deletion. SP-C mRNA was present in normal size and amount. By immunofluorescence, proSP-C was aggregated within alveolar Type II cells in a compartment separate from SP-B. In airway surfactant, there was little or no mature SP-B or SP-C; SP-A content was increased. Minimum surface tension was increased (20 mN/m, normal < 5 mN/m). Type II cells contained normal and disorganized appearing lamellar bodies by electron microscopy. This spontaneous deletion on one allele of the SP-C gene was associated with sporadic ILD and abnormalities in surfactant composition and function. We propose that a dominant negative effect on surfactant protein metabolism and function results from aggregation of misfolded proSP-C and subsequent cell injury and inflammation.