Surfactant protein C (SP-C) is a hydrophobic 35-amino acid peptide that co-isolates with the phospholipid fraction of lung surfactant. SP-C represents a structurally and functionally challenging protein for the alveolar type 2 cell, which must synthesize, traffic, and process a 191-197-amino acid precursor protein through the regulated secretory pathway. The current understanding of SP-C biosynthesis considers the SP-C proprotein (proSP-C) as a hybrid molecule that incorporates structural and functional features of both bitopic integral membrane proteins and more classically recognized luminal propeptide hormones, which are subject to post-translational processing and regulated exocytosis. Adding to the importance of a detailed understanding of SP-C biosynthesis has been the recent association of mutations in the proSP-C sequence with chronic interstitial pneumonias in children and adults. Many of these mutations involve either missense or deletion mutations located in a region of the proSP-C molecule that has structural homology to the BRI family of proteins linked to inherited degenerative dementias. This review examines the current state of SP-C biosynthesis with a focus on recent developments related to molecular and cellular mechanisms implicated in the emerging role of SP-C mutations in the pathophysiology of diffuse parenchymal lung disease.