Insulin binding was studied in type II pneumocytes isolated from fetal rabbit lungs (27 days of gestation) and grown in monolayers in tissue culture. The mean high affinity receptor site number was 11.8 +/- 1.4 X 10(3) (+/-SEM)/cell, with a Kd of 0.45 +/- 0.07 nM (n = 6). Low affinity sites averaged 432 +/- 10.7 X 10(3)/cell, with a Kd of 45.6 +/- 11.8 nM. Incubation of the cells with 5 X 10(-10) M (Bu)2cAMP (DBcAMP) and 10(-3) M methylisobutylxanthine (MIX) for 18 h led to significant increases in the number of high affinity receptor sites and Kd (P = 0.025 and 0.05, respectively). Incubation of the cells with insulin (1 microgram/ml) for 18 h led to a significant diminution in the mean number of high affinity sites to 3.23 +/- 0.68 X 10(3)/cell (P = 0.0025). There was no significant change in the Kd of the high affinity sites. There was also no significant change in the number or affinity of the low affinity sites. When the cells were incubated with insulin in the presence of DBcAMP (5 X 10(-4) M) and MIX (10(-3) M), there was a significant increase in high affinity binding sites to a mean of 8.87 +/- 2.18 X 10(3)/cell (n = 4) compared to the value after incubation in the presence of insulin alone. There was no significant increase in the Kd of the high affinity sites. The following conclusions were drawn from these experiments. 1) Fetal type II pneumocytes possess receptors with high affinity for insulin. 2) The up-regulation of insulin receptor binding induced by high ambient concentrations of insulin in vivo in rabbit fetal lungs and circulating human monocytes does not occur in vitro when isolated pneumocytes are grown in tissue culture. 3) Insulin binding to type II pneumocytes is enhanced by DBcAMP and MIX. 4) Insulin down-regulation of receptor binding is significantly counteracted by DBcAMP and MIX.