Surfactant protein C (SP-C) is a highly hydrophobic protein found in pulmonary surfactant. SP-C is synthesized exclusively in alveolar type II cells as a 21 kDa integral membrane precursor protein and subsequently proteolytically processed to a 3.7 kDa secretory protein. SP-C enhances the adsorption and spreading of phospholipids at the air-liquid interface thereby promoting the surface tension-lowering properties of surfactant. The importance of SP-C in normal lung function is underscored by the recent findings of inflammatory lung diseases associated both with absence of alveolar SP-C and with cellular expression of mutant SP-C isoforms. This review examines our current understanding of the role of SP-C in maintaining alveolar epithelial homeostasis and the potential role of abnormal SP-C expression in the development of lung diseases with particular emphasis on microbial pulmonary infection and inflammation.