Distal lung epithelial cells (DLECs) play an active role in fluid clearance from the alveolus by virtue of their ability to actively transport Na+ from the alveolus to the interstitial space. The present study evaluated the ability of activated macrophages to modulate the bioelectric properties of DLECs. Low numbers of lipopolysaccharide (LPS)-treated macrophages were able to significantly reduce amiloride-sensitive short-circuit current (Isc) without affecting total Isc or monolayer resistance. This was associated with a rise in the flufenamic acid-sensitive component of the Isc. The effect was reversed by the addition of N-monomethyl-L-arginine to the medium, implying a role for nitric oxide. We hypothesized that macrophages exerted their effect by expressing inducible nitric oxide synthase (iNOS) in DLECs. The products of LPS-treated macrophages increased the levels of iNOS protein and mRNA transcripts in DLECs as well as causing a rise in iNOS activity. Immunofluorescence microscopy of LPS-stimulated macrophage-DLEC cocultures with anti-nitrotyrosine antibodies provided evidence for the generation of peroxynitrite in macrophages but not in DLECs. These data indicate that activated macrophages in the lung may contribute to impaired resolution of acute respiratory distress syndrome and suggest a novel mechanism whereby nitric oxide might alter cell function by altering its ion-transporting phenotype.