There is a developmental increase in fatty acid biosynthesis and surfactant production in late-gestation fetal lung and both are accelerated by glucocorticoids. We have examined the distribution of the newly synthesized fatty acids to determine whether they are preferentially incorporated into surfactant. Explants of 18 day fetal rat lung were cultured with and without dexamethasone for 48 h and then with [3H]acetate for 4 h after which labeled fatty acids were measured. Incorporation of radioactivity from acetate was considered a measure of newly synthesized fatty acids. Phospholipids contained 86% of the newly synthesized fatty acids of which approx. 80% were in phosphatidylcholine. Phosphatidylcholine and disaturated phosphatidylcholine contained a much greater percentage of the labeled fatty acids than of the phospholipid mass determined by phosphorus assay while phosphatidylethanolamine, phosphatidylserine and sphingomyelin contained less. Dexamethasone increased the rate of acetate incorporation into total lipid fatty acids but it had little effect on fatty acid distribution, except that it increased the percentages in phosphatidylglycerol and disaturated phosphatidylcholine. The hormone also increased the mass of these two phospholipids to a greater extent than that of the total. These data suggested that the newly synthesized fatty acids are preferentially incorporated into surfactant phospholipids and that this process is accelerated by dexamethasone. However, since phosphatidylcholine and phosphatidylglycerol are not exclusive to surfactant, we compared isolated lamellar bodies with a residual fraction not enriched in surfactant. The rate of acetate incorporation into fatty acids in lamellar body phosphatidylcholine as well as its specific activity (radioactivity per unit phosphorus) were both increased by dexamethasone. Specific activity, however, was no greater in the lamellar bodies than in the residual fraction in both control and dexamethasone-treated cultures. Therefore, there is no preferential incorporation of newly synthesized fatty acids into phospholipids in surfactant as opposed to those in other components of the lung.