11-Beta hydroxysteroid dehydrogenase type 2 (HSD2) oxidizes the biologically active glucocorticoid (GC), cortisol, to inactive cortisone. We characterized HSD2 gene expression and activity in human adult and fetal lung tissues and in cultured fetal lung explants, and examined the potential regulation of HSD2 in the fetal lung by sex steroids. Human adult lung, fetal lung, and cultured fetal lung explant tissues contained similar amounts of HSD2 mRNA. However, higher levels of HSD2 protein were detected in human fetal lung tissue than in adult lung, with expression being restricted to a subset of epithelial cells in the fetal lung tissue. Differentiated fetal lung explants maintained in culture expressed higher levels of HSD2 protein and enzymatic activity than undifferentiated fetal lung tissues. Finally, HSD2 protein levels were decreased in male, but not female, fetal lung explants treated with 17-beta estradiol. In contrast, 5-alpha dihydrotestosterone did not significantly affect HSD2 levels. These data indicate that HSD2 protein and activity levels increase in parallel with the differentiation of alveolar type II epithelial cells in vitro, and that HSD2 protein levels are regulated by 17-beta estradiol in male fetal lung tissue.