Type II alveolar cells were isolated from fetal rabbit lungs and used to determine the effect of GTP-binding protein activation on release of surfactant-related material. Cells were prelabelled with [3H]choline for 24 hours. NaF, a G-protein activator and GTP gamma S, a nonhydrolysable analogue of GTP, both loaded by hypoosmotic shock treatment, stimulated release of radioactive disaturated phosphatidylcholine. Localization of the cellular binding of [alpha-32P]GTP in fetal type II cells which were induced to differentiate by exposure to fetal lung fibroblast conditioned medium showed that two proteins of apparent molecular weights of 39.6 kd and 17.9 kd bound [alpha-32P]GTP. These proteins were detected only in the cells exposed to the conditioned medium. These results suggest GTP-binding proteins are involved in DSPC secretion and differentiation of fetal type II cells is accompanied by changes in GTP binding characteristics.