For alveolar type I cells, phenotype plasticity and physiology other than gas exchange await further clarification due to in vitro study difficulties in isolating and maintaining type I cells in primary culture. Using an established in vitro model of human fetal type II cells, in which the type II phenotype is induced and maintained by adding hormones, we assessed for transdifferentiation in culture toward a type I-like cell with hormone removal for up to 144 h, followed by electron microscopy, permeability studies, and RNA and protein analysis. T he distal alveolar epithelium contains type I and II cells. Type II cells comprise 75% of distal lung epithelium, 7% of the surface area, and produce surfactant. Type II cells have many well-characterized markers, including lamellar bodies, surfactant proteins A, B, C, and D (SP-A, B, C, and D) (1), and the aspartic protease pepsinogen C (PGC) (2).Type I cells, although less numerous, cover 93% of adult lung surface area and provide the gas exchange surface (1). Other type I functions, such as ion transport and fluid homeostasis, are less known. Type I cells form a tight monolayer with low permeability (3). However, the utility of previously described type I biochemical markers (4) has been limited by variable reproducibility and expression between species.Challenges in isolation and culture have limited progress in type I cell biology. Despite isolated reports (5,6), there are no widespread primary culture models. Instead, rat type II cells transdifferentiated toward a type I cell on tissue culture plastic (7) have served as a proxy for type I cells (8,9). There are limited data with regards to transdifferentiation in adult human alveolar epithelium (10), with no previous in vivo descriptions in human fetal lung. Rodent model transdifferentiation and the observation that type II cells serve as progenitors of type I cells after alveolar injury in mature lung (11) have led to the assumption that type I cells are derived from type II cells. However, the possibility that both are derived from a common precursor and retain some degree of plasticity has not been examined in the human fetal lung.Because of its potential plasticity, fetal alveolar epithelium provides unique opportunities to study differentiation/ transdifferentiation pathway(s) in the developing lung. We previously demonstrated that type II cells from human fetal lung can maintain a differentiated phenotype with dexamethasone, cAMP, and isobutylmethylxanthine (DCI) (12) and that these conditions induce differentiation of type II cells from naive human fetal lung epithelium (13). Here, we demonstrate that DCI withdrawal from cultured human fetal type II cells results in transdifferentiation toward type I-like cells. Transdifferentiation is associated with diminution of type II morphology, decreased expression of type II markers, and induction of type I cell markers. Importantly, transdifferentiated cells behave like type I cells, with decreased permeability and increased transepithelial resistance (T...