The central focus of this proposal is to describe the production of a factor released by type II alveolar cells from their basolateral surface which inhibits the proliferation of interstitial cells and epithelial cells. The factor also appears to affect the differentiation of epithelial cells. The proposal will also evaluate the effect of the inhibitory factor on the generation of second messengers. Finally, the studies will isolate and characterize the factor. The research environment is excellent for these studies and also includes a large number of investigators in the pulmonary division and the basic sciences who are interested in pulmonary cell biology, especially as it relates to epithelial cells and lipid-derived mediators. The studies suggest that the factor released by the type II cells may: 1) regulate the proliferation of lung interstitial cells, such as fibroblasts and smooth muscle cells; 2) regulate the proliferation of type II cells, themselves; and 3) participate in the differentiation of type II cells to type I cells. The studies further suggest that an important event which determines the development of pulmonary fibrosis is injury to the alveolar epithelium.