In lung, type II cells are the site of synthesis of phosphatidylcholine (PC), a major component of pulmonary surfactant. Clonal culture methods permit isolation of an epithelial cell strain (L-2) derived from type II cells of intact rat lung capable of active PC production in vitro. Isotopic labeling of these monolayer cultures show that the choline incorporation pathway is the predominant biosynthetic route for PC production. This same pathway is utilized for PC production in whole lung. Three enzymes of this pathway are readily detected in L-2 cells. Determination of specific enzyme activity in monolayers and whole lung indicate that clonally derived L-2 cells are enriched in choline kinase (10-fold), cholinephosphate cytidyl transferase (10-fold) and cholinephosphotransferase activity (5-fold). Our second approach was to develop an in vitro system in which cellular inter-relationships and cell to cell contacts present in whole lung are maintained. This organotypic system is formed by reaggregation of monodispersed fetal rat lung cells into alveolar-like structures (ALS). The ALS are comprised primarily of type II cells as evidenced by the presence of osmiophilic lamellar bodies in the cells. Biosynthesis of these lamellar bodies occurs de novo and type II cells in the ALS continue to synthesize lamellar bodies. Both systems permit study of a variety of agents of pulmonary surfactant production in vitro.