A characteristic reaction of the lung to inhaled ozone is an increase in the number of type II epithelial cells and alveolar macrophages (AMs). In the present study, we analyzed mechanisms regulating this response. Acute exposure of rats to ozone (2 parts/million, 3 h) induced expression of proliferating cell nuclear antigen, a marker of cellular proliferation, in both type II cells and AMs. This was maximum 48 h after ozone inhalation. Type II cells and AMs isolated from treated rats at this time also incorporated significantly more [³H]thymidine ([³H]TdR) than cells from control animals. When type II cells and AMs were cocultured, a synergistic increase in [³H]TdR uptake was observed. This appeared to be due to increased DNA synthesis by both cell types. Thus [³H]TdR incorporation by type II cells and AMs cocultured with mitomycin C-treated AMs and type II cells, respectively, was elevated compared with cells cultured alone. Type II cells and AMs plated onto tissue culture inserts, as well as culture supernatants from these cells, were found to stimulate DNA synthesis in AMs and type II cells, respectively. In addition, crude membrane preparations from these cells exhibited growth-promoting activity. Thus the mitogenic effects of both cell types appeared to be mediated by soluble factors and membrane-associated molecules. Ozone inhalation resulted in an increase in the mitogenic activity of AMs treated with mitomycin C and plated on tissue culture inserts toward type II cells and of type II cell culture supernatants toward AMs. These data suggest that type II cell and AM proliferation contributes to the regulation of the number of cells in the lung under normal homeostatic conditions and after ozone-induced injury. Moreover, type II cells and AMs produce paracrine mediators that contribute to cellular proliferative responses.