The functional role of neutral lipids in the lung is poorly understood. Lysosomal acid lipase (LAL) is a critical enzyme in hydrolysis of cholesteryl esters and triglycerides to generate free fatty acids and cholesterol in lysosomes. Human LAL was over-expressed in a doxycycline-controlled system in mouse respiratory epithelial cells to accelerate intracellular neutral lipid degradation and perturb the surfactant homeostasis in the lung. In this animal system, neutral lipid concentrations of pulmonary surfactant were reduced in bronchoalveolar lavage fluid (BALF) in association with decrease of surfactant protein C (SP-C) gene expression. The size and the number of lamellar bodies in alveolar type II epithelial cells (AT II cells) were significantly reduced accordingly. The number of macrophages required for surfactant recycling in BALF was also significantly reduced. As a result of these combinatory effects, emphysema of the alveolar structure was observed. Taken together, neutral lipid homeostasis is essential for maintenance of lamellar body genesis and the alveolar structure in the lung.