Rab38 is a rat Hermansky-Pudlak syndrome gene that plays an important role in surfactant homeostasis in alveolar type II (ATII) pneumocytes. We examined Rab38 function in regulating lamellar body (LB) morphology in ATII cells. Quantitative electron microscopy revealed that LBs in ATII cells were ∼77% larger in Rab38-null fawn-hooded hypertension (FHH) than control Sprague-Dawley (SD) rats. Rab38 protein expression was restricted in lung epithelial cells but was not found in primary endothelial cells. In SD ATII cells, Rab38 protein level gradually declined during 5 days in culture. Importantly, endogenous Rab38 was present in LB fractions purified from SD rat lungs, and transiently expressed enhanced green fluorescent protein (EGFP)-tagged Rab38 labeled only the limiting membranes of a subpopulation (∼30%) of LBs in cultured ATII cells. This selective targeting was abolished by point mutations to EGFP-Rab38 and was not shared by Rab7 and Rab4b, which also function in the ATII cells. Using confocal microscopy, we established a method for quantitative evaluation of the enlarged LB phenotype temporally preserved in cultured FHH ATII cells. A direct causal relationship was established when the enlarged LB phenotype was reserved and then rescued by transiently reexpressed EGFP-Rab38 in cultured FHH ATII cells. This rescuing effect was associated with dynamic EGFP-Rab38 targeting to and on LB limiting membranes. We conclude that Rab38 plays an indispensible role in maintaining LB morphology and surfactant homeostasis in ATII pneumocytes.