The epithelium of the pulmonary alveolus is a major target for oxidant injury, and its proper repair following injury is dependent on the proliferative response of its stem cells, the type 2 cells. We have recently shown that hyperoxia arrests proliferation of an immortalized type 2 cell line (SV40T-T2) and that expression of several growth-related genes, normally induced near the G1/S and boundary was altered with a block of translation of their mRNA. In the present study we examined the possible role of the insulin-like growth factor (IGF) system and of transforming growth factor-beta 1 (TGF-beta 1) in the arrest of proliferation induced by hyperoxia. We show that IGF-binding protein 2 (IGFBP-2) accumulates to higher levels in culture medium of SV40T-T2 cells whose proliferation has been arrested by hyperoxia. This proliferation arrest is associated with increased expression of IGFBP-2 mRNA and with induction of type 2 IGF receptor and IGF-II mRNAs. When O2-arrested cells were allowed to resume proliferation in normoxia, the level of expression of these genes rapidly decreased to control levels. We also, found that TGF-beta 1 was induced by O2 exposure, that TGF-beta 1 inhibited SV40T-T2 proliferation, and that TGF-beta 1 itself was a potent stimulator of IGFBP-2 expression. These studies suggest a regulatory link between components of the IGF system and TGF-beta 1 in hyperoxic control of cell proliferation of alveolar epithelial cells.