Humans with bacterial sepsis are predisposed to acute lung injury with respiratory failure and have an increased risk of pulmonary infection. Because the alveolar macrophage is the resident phagocyte in the lung and a defect in antimicrobial activity could predispose to infection, we assessed the functional integrity of these cells in vitro in a canine model of Escherichia coli endotoxin-induced lung injury with respiratory failure. Dogs were given 2 or 20 mg/kg of E. coli endotoxin 055:B5, and alveolar macrophages from pulmonary lavage were compared with those from control dogs. The physiologic criteria for the adult respiratory distress syndrome and pathologic confirmation of acute lung injury were produced in all endotoxin-treated animals. The production of acute lung injury with respiratory failure by E. coli endotoxin was associated with several alterations in alveolar macrophage function. Adherence was significantly reduced for cells from the endotoxin groups. The alveolar macrophages from endotoxin-treated animals differed from those from control animals, with significantly greater production of hydrogen peroxide, significantly greater peaks in chemiluminescence, significantly reduced phagocytosis of Staphylococcus aureus and E. coli at all times, and a diminished ability to kill cell-associated S. aureus and E. coli over time. These derangements could play a role in the therapeutic failures of pneumonia, an increased risk for nosocomial pneumonias, or the propagation of acute lung injury with respiratory failure.