Regulation of the surfactant protein B gene (SP-B) is developmentally controlled and highly tissue specific. To elucidate the SP-B gene temporal/spatial expression pattern in lung development at the transcriptional level, a transgenic mouse model line carrying the human SP-B (hSP-B) 1.5-kb 5'-flanking regulatory region and the lacZ gene was established. Expression of hSP-B 1.5-kb lacZ gene started at the onset of lung formation [embryonic day 9 (E9)] and was restricted to epithelial cells throughout prenatal and postnatal lung development. In the adult lung, hSP-B 1.5-kb lacZ gene expression was restricted to bronchiolar and alveolar type II epithelial cells. In lung explant culturing studies, the hSP-B 1.5-kb lacZ gene was highly expressed in newly formed epithelial tubules during the respiratory branching process. In a second transgenic mouse line, an enhancer region, which binds to thyroid transcription factor-1, retinoic acid receptor, signal transducers and activators of transcription 3, and nuclear receptor coactivators (SRC-1, ACTR, TIF2, and CBP/p300), was deleted from the hSP-B 1.5-kb lacZ gene. The deletion abolished hSP-B lacZ gene expression in bronchiolar epithelial cells and significantly reduced its expression level in alveolar type II epithelial cells in transgenic mice.