We cultured isolated alveolar type II epithelial cells on a collagen gel matrix. At confluence, cultured type II cells were exposed to air. Under these conditions, the cellular density of the type II cells increased and they nodularly aggregated. The cultured cells consisted mainly of flattened epithelia intermingled with cuboidal cells. In the cytoplasm and at the apical surface of cuboidal cells, a surfactant protein was detected by immunohistochemistry and electron microscopy. Electron microscopic examination revealed that the surfactants in the cytoplasm increased when the cells were exposed to air. On the other hand, the flattened cells morphologically resembled type I cells in vivo. Air exposure treatment on the collagen gel matrix promoted the maintenance of the characteristic differentiation of alveolar epithelial cells. This culture system seemed to provide an appropriate physiological environment in which to study differentiation and disorders of pulmonary alveoli.