Lung surfactant protein B (SP-B) is required for proper surface activity of pulmonary surfactant. In model lung surfactant lipid systems composed of saturated and unsaturated lipids, the unsaturated lipids are removed from the film at high compression. It is thought that SP-B helps anchor these lipids closely to the monolayer in three-dimensional cylindrical structures termed "nanosilos" seen by atomic force microscopy imaging of deposited monolayers at high surface pressures. Here we explore the role of the SP-B NH2 terminus in the formation and stability of these cylindrical structures, specifically the distribution of lipid stack height, width, and density with four SP-B truncation peptides: SP-B 1-25, SP-B 9 -25, SP-B 11-25, and SP-B 1-25Nflex (prolines 2 and 4 substituted with alanine). The first nine amino acids, termed the insertion sequence and the interface seeking tryptophan residue 9, are shown to stabilize the formation of nanosilos while an increase in the insertion sequence flexibility (SP-B 1-25Nflex) may improve peptide functionality. This provides a functional understanding of the insertion sequence beyond anchoring the protein to the two-dimensional membrane lining the lung, as it also stabilizes formation of nanosilos, creating reversible repositories for fluid lipids at high compression. In lavaged, surfactant-deficient rats, instillation of a mixture of SP-B 1-25 (as a monomer or dimer) and synthetic lung lavage lipids quickly improved oxygenation and dynamic compliance, whereas SP-B 11-25 surfactants showed oxygenation and dynamic compliance values similar to that of lipids alone, demonstrating a positive correlation between formation of stable, but reversible, nanosilos and in vivo efficacy.