Alveolar epithelial type II (AT2) cells have been thought to be the progenitors of terminally differentiated type I (AT1) cells in the adult animal in vivo. In this study, we used an AT1 cell-specific monoclonal antibody (mAb VIII B2) to investigate expression of the AT1 cell phenotype accompanying reversible changes in expression of the AT2 cell phenotype. AT2 cells were isolated and cultured either on attached collagen gels or on gels detached 1 or 4 days after plating and maintained thereafter as floating gels. Monolayers on both attached and floating gels were harvested on days 4 and 8 and analyzed by electron microscopy for changes in morphology and binding of mAb VIII B2. Results indicate that: (1) alveolar epithelial cells (AEC) on attached gels develop characteristics of the AT1 cell phenotype, (2) AEC on gels detached on day 1 maintain features of the AT2 cell phenotype (and do not react with mAb VIII B2), and (3) the expression of AT1 cell phenotypic traits seen by day 4 on attached gels is reversed after detachment. We conclude that commitment to the AT1 and AT2 cell lineages requires continuous regulatory input to maintain the differentiated states, and that transdifferentiation between AT2 and AT1 cells may be reversible.