Elucidation of the structure and function of the hydrophobic surfactant protein (SP-B) and the SP-B gene has provided critical insight into surfactant homeostasis and control of respiratory epithelial cell gene expression. Surfactant protein B, in concert with surfactant protein A (SP-A), surfactant protein C (SP-C), and surfactant phospholipids, contributes to the structure and function of surfactant particles, determining surface activities and pathways by which surfactant phospholipids and proteins are processed, routed, packaged, and secreted from lamellar bodies by type II epithelial cells. After secretion, SP-B plays an essential role in determining the structure of tubular myelin, the stability and rapidity of spreading, and the recycling of surfactant phospholipids. The biochemical and structural signals underlying the homeostasis of alveolar surfactant are likely mediated by interactions between the surfactant proteins and phospholipids producing discrete structural forms that vary in size, aproprotein, and phospholipid content. Distinctions in structure, protein, and size are likely to determine the function of surfactant particles, their catabolism, or recycling by alveolar macrophages and airway epithelial cells. Analysis of the genetic controls governing the SP-B gene has led to the definition of DNA-protein interactions that determine respiratory epithelial cell gene expression in general. The important role of SP-B in lung function was defined by the study of a lethal neonatal respiratory disease, hereditary SP-B deficiency, caused by mutations in the human SP-B gene.