The Na+ transport function of alveolar epithelium represents an important mechanism for air space fluid clearance after acute lung injury. We studied the effect of endotoxin-stimulated rat alveolar macrophages on lung epithelial ion transport and permeability in vitro. Cultured rat distal lung (alveolar) epithelial monolayers incubated with both endotoxin and macrophages demonstrated a 75% decline in transepithelial resistance and a selective 60% reduction in amiloride-sensitive short-circuit current (Isc). Single-channel patch-clamp analysis demonstrated a 60% decrease in the density of 25-pS nonselective cation (NSC) channels on the apical membrane of epithelium exposed to both endotoxin and macrophages. A concurrent reduction in epithelial F-actin content suggested a role for actin depolymerization in mediating this effect. Incubation of cocultures with the methylated L-arginine (Arg) derivative NG-monomethyl-L-arginine prevented the reduction in epithelial Isc, as did substitution of L-Arg with D-Arg or incubation in L-Arg-free medium. Furthermore, the stable and products of Arg metabolism were found to have no effect on epithelial ion transport. These studies show that endotoxin-stimulated alveolar macrophages impair distal lung epithelial ion transport by an L-Arg-dependent mechanism by inactivating amiloride-sensitive 25-pS NSC channels. This may represent a novel mechanism whereby local inflammatory cells regulate lung epithelial ion transport. This could affect the ability of the lung to clear fluid from the air space.