gamma-Glutamyl transferase (gamma-GT) catalyzes a transpeptidation reaction which is involved in the metabolism of glutathione. Glutathione is abundant within the epithelial lining fluid of the lung. However, little is known about gamma-GT expression in the epithelial cells of the lung alveolus. Herein we show that the pulmonary alveolar epithelial type 2 cell expresses the gene for gamma-GT. We were unable to detect expression in the pulmonary alveolar epithelial type 1 cell or in the pulmonary alveolar macrophage. gamma-GT expression in the pulmonary alveolar epithelial type 2 cell is via mRNA III, a transcript that was initially cloned from the liver. This cell synthesizes gamma-GT protein and releases enzyme activity into a surfactant-associated pool within the lung alveolus. The specific activity of this surfactant-associated enzyme is almost 10-fold higher than that of whole lung. This activity results from amphipathic gamma-GT since it partitions with lung surfactant phospholipid and with the detergent phase of Triton X-114. Activity can be dissociated from each by papain proteolysis. These results demonstrate that gamma-GT is expressed in the differentiated pulmonary alveolar epithelial type 2 cell and that amphipathic gamma-GT protein is released by this cell along with lung surfactant. These results suggest that surfactant may serve an expanded role in lung cell biology as the vehicle for the redistribution of amphipathic signal anchored proteins throughout the gas exchange surface of the lung.