This report summarizes recent data regarding the direct responses of the type II alveolar epithelial cell to agents that are known to produce lung injury. These responses are not limited to cytotoxicity or cell death, but include alterations in the known differentiated functions of this cell type. Among the functions assessed and shown to be altered by toxic agents are: (1) synthesis and secretion of pulmonary surfactant; and (2) proliferation and renewal of the alveolar type I cell population. Agents such as ionizing radiation, CdCl2 and hyperoxia are shown to directly alter pulmonary surfactant phospholipid synthesis and secretion by type II cells in a manner consistent with their known effect at the whole animal level. Changes in protein synthesis are also observed. In addition, information is presented which suggests that pulmonary epithelial proliferation and repair is a complex process mediated, in part, by complex cell-cell interaction in the pulmonary parenchyma. In particular, the alveolar macrophage may play a significant role through its ability to synthesize and secrete potent growth factors that influence type II cell growth.