Keratinocyte growth factor (KGF) administered as a single intratracheal injection causes a prominent dose-dependent proliferation of type II alveolar epithelial cells in the lungs of adult rats. The increase in mitotically active alveolar cells histologically appears as a micropapillary epithelial cell hyperplasia after 2 d and peaks after 3 d in the form of monolayers of cuboidal epithelial cells lining alveolar septae. Proliferating cell nuclear antigen immunohistochemistry confirmed the profound proliferative response induced by KGF. The hyperplastic alveolar lining cells contain immunoreactive surfactant protein B and are ultrastructurally noted to contain lamellar inclusions characteristic of surfactant-producing type II pneumocytes. Mild focal bronchiolar epithelial hyperplasia is noted but is much less striking than the proliferation of type II pneumocytes. Large airways are unaffected by KGF. Daily intravenous injection of KGF is also able to cause pneumocyte proliferation. The normal adult rat lung constitutively expresses both KGF and KGF receptor mRNA, suggesting that endogenous KGF may be implicated in the paracrine regulation of the growth of pneumocytes. In conclusion, KGF rapidly and specifically induces proliferation and differentiation of type II pneumocytes in the normal adult lung.