Alveolar type I (TI) cells are large, squamous cells that cover 95-99% of the internal surface area of the lung. Although TI cells are believed to be terminally differentiated, incapable of either proliferation or phenotypic plasticity, TI cells in vitro both proliferate and express phenotypic markers of other differentiated cell types. Rat TI cells isolated in purities of >99% proliferate in culture, with a six-fold increase in cell number before the cells reach confluence; >50% of the cultured TI cells are Ki67+. At cell densities of 1-2 cells/well, ~ 50% of the cells had the capacity to form colonies. Under the same conditions, type II cells do not proliferate. Cultured TI cells express RTI40 and aquaporin 5 (AQP5), phenotypic markers of the TI cell phenotype. By immunofluorescence, Western blotting, and QT-PCR, TI cells express OCT-4A (POU5F1), a transcription factor associated with maintenance of the pluripotent state in stem cells. Based on the expression patterns of various marker proteins, TI cells are distinct from either of two recently described putative pulmonary multipotent cell populations, the "bronchoalveolar stem cell" or the "OCT-4+ stem/progenitor cell." Although TI cells in adult rat lung tissue do not express either SP-C or CC-10, respective markers of the TII and Clara cell phenotypes, in culture TI cells can be induced to express both SP-C and CC-10. Taken together, the findings that TI cells proliferate and exhibit phenotypic plasticity in vitro raises the possibility that TI cells may have similar properties in vivo.