This study defines the surface and ultrastructural changes which occur in mouse lungs during the early stages of continuous low-level ozone exposure. Swiss-Webster mice were exposed for 35 consecutive days to 0.5 ppm ozone, a level of oxidant gas which simulates levels occurring during an episode of severe smog in urban areas of the California south coast air basin. Groups of mice were killed on day 7, 21, or 35 of exposure and their lungs excised and examined by light microscopy, scanning electron microscopy, and transmission electron microscopy. Lung damage was most severe at the transition zone from terminal bronchiole to alveolar duct. This centriacinar lesion consisted of (1) increased numbers of macrophages within proximal alveoli of alveolar ducts, (2) clusters of type 2 pneumonocytes lining these proximal alveoli, (3) changes in surface characteristics of Clara cells, and (4) hyperplastic nodules of bronchiolar epithelium within terminal bronchioles. Inflammatory cell infiltrates were reduced in numbers at 35 days of exposure as compared to 7 days of exposure, but the hyperplastic bronchiolar epithelium persisted and, in fact, increased in severity as exposure length increased. Although inflammatory cell infiltrates were observed in proximal alveoli of alveolar ducts, the hyperplastic bronchiolar epithelial changes were observed throughout the lengths of terminal bronchioles examined. The variability in response to ozone insult of nonciliated cells in the terminal bronchiole of rats, mice, and monkeys is discussed.