Transgenic mice bearing chimeric genes consisting of 5'-sequences derived from the human surfactant protein C (SP-C) gene and the bacterial chloramphenicol acetyltransferase (CAT) gene were generated. Analysis of CAT activity was utilized to demonstrate tissue-specific and developmental expression of chimeric genes containing 3.7 kb of sequences from the human SP-C gene. Lung-specific expression of the 3.7 SP-C-CAT transgene was observed in eight distinct transgenic mouse lines. Expression of the 3.7 SP-C-CAT transgene was first detected in fetal lung on day 11 of gestation and increased dramatically with advancing gestational age, reaching adult levels of activity before birth. In situ hybridization demonstrated that expression of 3.7 SP-C-CAT mRNA was confined to the distal respiratory epithelium. Antisense CAT hybridization was detected in bronchiolar and type II epithelial cells in the adult lung of the 3.7 SP-C-CAT transgenic mice. In situ hybridization of four distinct 3.7 SP-C-CAT transgenic mouse lines demonstrated bronchiolar-alveolar expression of the chimeric CAT gene, although the relative intensity of expression at each site varied within the lines studied. Glucocorticoids increased murine SP-C mRNA in fetal lung organ culture. Likewise, expression of 3.7 SP-C-CAT transgene increased during fetal lung organ or explant culture and was further enhanced by glucocorticoid in vitro. The 5'-regions of human SP-C conferred developmental, lung epithelial, and glucocorticoid-enhanced expression of bacterial CAT in transgenic mice. The increased expression of SP-C accompanying prenatal lung development and exposure to glucocorticoid is mediated, at least in part, at the transcriptional level, being influenced by cis-active elements contained within the 5'-flanking region of the human SP-C gene.