Isolated alveolar type II cells were exposed to ozone by gas diffusion through the thin Teflon bottom of culture dishes. After exposure, type II cells were further incubated in the presence of labeled substrates to assess the capacity to synthesize surfactant lipids. The incorporation of [Me-14C]choline into both total and disaturated phosphatidylcholines in inhibited to 50% of the control values under conditions that result in a diffusion of 0.4 microgram O3/18 cm2-dish per 2.5 h. The incorporation rates of [1-14C]palmitate, [1-14C]acetate, D[U-14C]glucose, and [1,3-3H]glycerol into phosphatidylcholines are also lower after ozone exposure. Moreover, the synthesis of phosphatidylglycerols and phosphatidylethanolamines from these substrates is also inhibited by exposure of type II cells to ozone. These incorporation studies indicate that the effect of ozone is early in the biosynthetic pathway, probably at the step catalyzed by the enzyme glycerolphosphate acyltransferase. Determination of the activity of this enzyme after the ozone exposure shows that it is decreased, whereas the activity of lysophosphatidylcholine acyltransferase is increased. The activity of choline phosphotransferase also appears to be decreased after exposure of type II cells to ozone, although this enzyme was less susceptible than glycerolphosphate acyltransferase. Studies with the sulfhydryl reagent 5,5'-dithiobis (2-nitrobenzoic acid) indicate a positive correlation between the effect of this compound on enzyme activities in sonicated type II cells and the sensitivity of these enzymes in intact cells to ozone. This suggests that the effect of ozone on the synthesis of surfactant lipids is at least partially exerted via oxidation of the sulfhydryl groups of glycerolphosphate acyltransferase.