Traditionally, our thinking about surfactant proteins has centered around their effects on the biophysical properties of surfactant phospholipids. It is now apparent that the three major surfactant proteins (SP-A, SP-B, and SP-C) are a biochemically and functionally diverse group of mammalian peptides. Accumulated data suggest that they have roles beyond modulation of alveolar surface tension. SP-C is a 33-35 amino acid peptide found in organic extracts of pulmonary surfactant. In part, because of its extreme hydrophobicity, a full understanding of SP-C is presently incomplete. Progress to date has included evaluation of the biophysical properties and investigations of the SP-C gene, including studies of the SP-C promoter. This review describes the unique structural and functional properties of the SP-C molecule and summarizes available data on its molecular biology and metabolism. Studies from literature show that SP-C represents a physiologically important peptide with novel structural properties; namely, extreme hydrophobicity, an alpha-helical membrane spanning region, and a unique posttranslational modification: palmitoylation. From data on similarly modified proteins, we propose that the properties of SP-C, including the covalent addition of palmitic acid, render it capable of being targeted to and interacting with specific cell membranes. A complete understanding of SP-C, especially with regard to its metabolism and function, may require a reorientation of our thinking to consider SP-C as a membrane peptide and not just as a "surfactant protein."