The specific activity of phosphatidate phosphohydrolase (PAPase) (EC 3.1.3.4) has been assayed in organotypic cultures of foetal rat lung type II alveolar pneumonocytes and in L2 cells derived from type II cells of the adult rat lung. This enzyme catalyses a critical step in the synthesis of phosphatidylcholine, the major lipid component of pulmonary surfactant. Surfactant is produced by the mature type II cell in culture as well as in vivo. The specific activity of PAPase in organotypic cultures prepared from foetal rat lung starting at 16 days of gestation increased four- to fivefold during the first 7 days in culture. The specific activity of this enzyme was further increased through the 21 days of culture. In parallel with the increase in PAPase specific activity in the cultures were morphological changes in the type II cells such as the appearance of increased numbers of lamellar bodies. The specific activities of PAPase samples derived from non-type II cell cultures maintained under identical conditions were compared. Organotypic cultures and L2 cells, a culture system that also exhibits type II cell characteristics, show PAPase specific activities five to six times greater than cultures that do not contain type II cells. PAPase activity in the type II cell cultures parallels the development of mature patterns of pulmonary surfactant synthesis storage and secretion.