The regulation by cyclic AMP and fatty acids of phosphatidylcholine (PC) synthesis in rat alveolar type II cells was studied. In contrast with results with hepatocytes, cyclic AMP and its potent chlorophenylthio analogue had no inhibitory effect on [Me-14C]choline incorporation into PC in pulse-chase studies with alveolar type II cells. The inclusion of the fatty acids palmitate, oleate or linoleate in the chase incubation medium stimulated the incorporation of [Me-14C]choline into PC by type II cells. The effect of palmitate, which was more pronounced than that of the other fatty acids, appeared to be concentration-dependent. Increased [Me-14C]choline incorporation into PC was paralleled by an accelerated disappearance of the radiolabel from choline phosphate, which is consistent with an activation of CTP:choline-phosphate cytidylyltransferase. This enzyme is considered to be rate-limiting in the synthesis of PC de novo by type II cells. As fatty acids are also substrate for PC synthesis, their effect could also be due to compensation for a fatty acid deficiency. To test this possibility, fatty acid synthesis in the type II cells was stimulated by addition of lactate. Even then, an additional stimulation of PC synthesis by palmitate was observed, which supports the regulatory influence of exogenous fatty acids. Incubation of type II cells in the presence of 0.2 mM-palmitate resulted in a 45% increase in the membrane-bound CTP:choline-phosphate cytidylyltransferase activity, whereas the soluble activity remained unchanged. Choline kinase activity in the soluble fraction increased by 48%. However, the increase in choline kinase is unlikely to be responsible for the increased metabolic flux through the choline phosphate pathway, because there is a relatively large pool of choline phosphate in type II cells. Therefore it is suggested that the microsomal CTP:choline-phosphate cytidylyltransferase is the form of this enzyme which is active in surfactant PC synthesis, and possibly has a regulatory role in this pathway.