The time course and magnitude of interferon production induced by influenza virus were determined in type II pneumocytes and alveolar macrophages isolated from rats (Sprague-Dawley). Although the peak of interferon production was approximately 20 h in both alveolar cell types, it was more than three- to fourfold higher in type II cells than in macrophages. Dose-response relationships were noted between the virus multiplicity of induction as well as population numbers of either alveolar cell type and interferon yields. The viral-induced cytokines produced by rat type II cells and alveolar macrophages exhibit physiochemical and biological properties characteristic of interferons and, with respect to type II pneumocytes, mark their heretofore unrecognized capability to produce interferon. The best cross-species antiviral protection afforded by these rat interferons to cells of different origin, expressed as percentage of homologous species (100%), was as follows: guinea pig 50, mouse 40%, and both human and monkey 0%. The heterologous antiviral activity by interferons from either rat alveolar macrophages or type II cells on alpha interferon-sensitive guinea pig cells suggests that these cytokines may be more appreciably related to the alpha-like interferon species. The growth of influenza and Sendai viruses was precluded in both rat alveolar macrophages and type II pneumocytes. The findings herein suggest that type II cells may be a major source of alveolar interferon for activating the antiviral state and modulating alveolar cell functions requisite for lung integrity.