We have investigated whether the loss of differentiated function observed in adult rat alveolar type II cells cultured on a substratum that promotes cell spreading and flattening represents a reversible phenotypic change. Cells were cultured for 4 and 8 days in association with fetal rat lung fibroblast feeder layers on either attached collagen gels, which promote the loss of differentiated function, or on floating collagen gels, which support differentiation. A fifth group of cultures were maintained as attached gels for 4 days, then detached and cultured as floating gels for the remaining 4 days. Expression of mRNAs for surfactant proteins A, B, and C, patterns of phospholipid biosynthesis, rates and patterns of protein synthesis, and cell morphology were evaluated as markers of differentiation. Without exception, detaching the gels after 4 days in culture resulted in significant recovery of differentiated characteristics, demonstrating that type II cells modulate differentiated function in response to the culture environment. The results are discussed in relation to the importance of normal cell architecture to normal cell function and to the possible in vitro progression of type II cells to type I cells.