CCAAT/enhancer binding protein γ (C/EBPγ) is a member of the C/EBP family of transcription factors, which lacks known activation domains. C/EBPγ was originally described as an inhibitor of C/EBP transactivation potential. However, previous study demonstrates that C/EBPγ augments the C/EBPβ stimulatory activity in lipopolysaccharide induction of IL-6 promoter in a B lymphoblast cell line. These data indicate a complexing functional role for C/EBPγ in regulating gene expression. Furthermore, the expression and function of C/EBPγ during inflammation are still largely unknown. In this study, we demonstrate that C/EBPγ activation was induced by IL-1β treatment in lung epithelial cells. Importantly, we demonstrate for the first time that C/EBPγ plays a critical role in regulating IL-1β-induced IL-6 expression in both mouse primary alveolar type II epithelial cells and a lung epithelial cell line, MLE12. We further provide the evidence that C/EBPγ inhibits IL-6 expression by inhibiting C/EBPβ but not NF-κB stimulatory activity in MLE12 cells. These findings suggest that C/EBPγ is a key transcription factor that regulates the IL-6 expression in alveolar epithelial cells, and may play an important regulatory role in lung inflammatory responses.