Pulmonary surfactant is a complex mixture of lipids and proteins that is synthesized exclusively by the alveolar type II epithelial cell. Surfactant is stored in large inclusions (lamellar bodies) that are secreted into the alveolar airspace by exocytosis. Newly secreted lamellar bodies unravel into a tubular network (tubular myelin) that subsequently adsorbs and spreads as a phospholipid-rich film that reduces surface tension at the air-liquid interface. Rapid adsorption and spreading of the phospholipid film are critical and require the presence of specific proteins, in particular surfactant proteins B and C (1-3).Surfactant protein B (SP-B) 1 is a hydrophobic peptide of 79 amino acids that avidly associates with surfactant phospholipids in the alveolar airspace (reviewed in Ref. 4). Homozygous mutations leading to the complete absence of SP-B in newborn human infants result in the rapid onset of respiratory distress syndrome which is refractory to mechanical ventilation and surfactant replacement (5, 6). The latter observation suggests that simple addition of mature peptide to the SP-B-deficient airway is not sufficient to restore lung function. Therefore, despite an obvious requirement for SP-B in normal lung function, the precise role(s) of SP-B in the structure, function, and metabolism of surfactant remains unclear.Human SP-B is synthesized by the type II epithelial cell as a preproprotein of 381 amino acids. The mature peptide is generated by sequential cleavage of the signal peptide (23 amino acids), the N-terminal propeptide (177 residues), and the Cterminal propeptide (102 residues) (7, 8). Propeptide cleavage occurs within the late endosome/multivesicular body which subsequently directs newly synthesized SP-B to the lamellar body (9); mature SP-B is also recycled from the alveolar airspace, via the endocytic pathway to the multivesicular body (10). Previous in vitro evidence supports the concept that trafficking of the mature peptide through the biosynthetic pathway requires the N-terminal but not the C-terminal domain of the propeptide (11,12). In the absence of both propeptide domains the mature peptide is degraded within the endoplasmic reticulum (11); however, an SP-B construct encoding both the Nterminal propeptide and the mature peptide (hSP-B ⌬c ) produces a truncated proprotein that is sorted to the multivesicular body where the propeptide is appropriately cleaved to liberate mature SP-B (12). These results clearly demonstrate that the N-terminal propeptide is required for the intracellular trafficking of SP-B; the function of the C-terminal propeptide, however, remains unknown.Lung morphogenesis and surfactant phospholipid synthesis in SP-B(Ϫ/Ϫ) mice proceed normally prior to birth (13). However, lamellar body formation is disrupted, resulting in abnormal inclusions consisting of multivesicular bodies and disorganized lamellae. Neither mature lamellar bodies nor tubular myelin were detected in the SP-B(Ϫ/Ϫ) mice. In addition to effects on lamellar body biogenesis, SP-B deficiency resulted in