Gas exchange after birth is entirely dependent on the remarkable architecture of the alveolus, its formation and function being mediated by the interactions of numerous cell types whose precise positions and activities are controlled by a diversity of signaling and transcriptional networks. In the later stages of gestation, alveolar epithelial cells lining the peripheral lung saccules produce increasing amounts of surfactant lipids and proteins that are secreted into the airspaces at birth. The lack of lung maturation and the associated lack of pulmonary surfactant in preterm infants causes respiratory distress syndrome, a common cause of morbidity and mortality associated with premature birth. At the time of birth, surfactant homeostasis begins to be established by balanced processes involved in surfactant production, storage, secretion, recycling, and catabolism. Insights from physiology and engineering made in the 20th century enabled survival of newborn infants requiring mechanical ventilation for the first time. Thereafter, advances in biochemistry, biophysics, and molecular biology led to an understanding of the pulmonary surfactant system that made possible exogenous surfactant replacement for the treatment of preterm infants. Identification of surfactant proteins, cloning of the genes encoding them, and elucidation of their roles in the regulation of surfactant synthesis, structure, and function have provided increasing understanding of alveolar homeostasis in health and disease. This Perspective seeks to consider developmental aspects of the pulmonary surfactant system and its importance in the pathogenesis of acute and chronic lung diseases related to alveolar homeostasis.