A lipid-containing interstitial cell (LIC) appears in the walls of alveoli during the period of postnatal lung growth associated with the formation of gas exchange surfaces. This cell has been isolated from the 10-day neonatal rat lung by digesting the lung with trypsin and collagenase and using a 6 per cent metrizamide discontinuous density gradient. 5.0 +/- 0.4 x 10(6) LIC per gm. of lung wet weight were isolated at 10 days. At this age, triglycerides accounted for 65 per cent of the LIC lipid with 62 per cent of the triglyceride fatty acids being unsaturated. Linoleic acid was a prominent triglyceride moiety. Density profiles of LIC isolated from 4-, 7-, 12-, 16-, and 21-day neonatal rats, using 0 to 10 per cent metrizamide continuous density gradients, revealed a 2-fold increase in LIC numbers between 4 and 7 days, after which LIC numbers decreased linearly until few LIC were observed at the age of weaning. Mean LIC density decreased from 1.045 gm. per cu. cm. at 4 days to 1.036 gm. per cu. cm. at 12 days, but thereafter increased to 1.050 gm. per cu. cm. at 21 days suggesting accumulation and dissipation of cytoplasmic lipid by LIC during the period of lung growth in which alveoli form. Although the origin, role, and fate of the LIC and its lipid are uncertain, the unique time of appearance of this distinct interstitial cell suggests that it is involved in alveolar formation and lung restructuring during early postnatal lung development.