The purpose of this study was to investigate the role of insulin-degrading enzyme (IDE, EC 3.4.22.11) in insulin degradation in alveolar epithelium. The primary culture of isolated rat type-II pneumocytes was used for the in-vitro characterization of IDE. Insulin was then administered intratracheally with various inhibitors to assess the improvement in its pulmonary bioavailability. In cultured type-II pneumocytes, the cytosolic insulin-degrading activity contributed 81% of total insulin degradation, reached a maximum at pH 7.5 and had an apparent Michaelis-Menten constant (Km) of 135 nM. N-Ethylmaleimide, p-chloromercuribenzoic acid and 1,10-phenanthroline inhibited insulin-degrading activity almost completely in both crude homogenate and cytosol. An immunoprecipitation study showed that IDE contributed 74% of cytosolic insulin-degrading activity. Western blot analysis showing a single band of 110 kDa on reduced SDS (sodium dodecylsulphate) gels confirmed the presence of IDE in cultured type-II cells. When given intratracheally with insulin, inhibitors including N-ethylmaleimide, p-chloromercuribenzoic acid, and 1,10-phenanthroline significantly enhanced the absolute bioavailability of insulin and the compound's hypoglycaemic effects. These results suggest that IDE is present in alveolar epithelium and might be involved in limiting insulin absorption in the lung.