The purpose of this study was to determine the expression and cellular functions of the epithelial NADPH oxidase DUOX1 during alveolar type II cell development. When human fetal lung cells (gestational age 11-22 weeks) were cultured to confluency on permeable filters, exposure of cells to a hormone mixture (dexamethasone, 8-bromo-cAMP, isobutyl-methyl xanthine; referred to as DCI) resulted in differentiation of cells into a mature type II phenotype as assessed by expression of lamellar bodies, surfactant proteins, and transepithelial electrical parameters. After 6 days in culture in presence of DCI, transepithelial resistance (2616 ± 529 ·cm²) and potential (-8.5 ± 0.6 mV) indicated epithelial polarization. At the same time treatment with DCI significantly increased the mRNA expression of DUOX1 (~21-fold), its maturation factor DUOXA1 (~12-fold), as well as DUOX protein (~12-fold), which was localized near the apical cell pole in confluent cultures. For comparison, in fetal lung specimens, DUOX protein was not detectable up to 27 weeks of gestational age but was strongly upregulated after 32 weeks. Function of DUOX1 was assessed by measuring H₂O₂ and acid production. Rates of H₂O₂ production were increased by DCI treatment and blocked by small interfering RNA directed against DUOX1 or by diphenylene iodonium. DCI-treated cultures also showed increased intracellular acid production and acid release into the mucosal medium and acid production was largely blocked by knockdown of DUOX1 mRNA. These data establish the regulated expression of DUOX1 during alveolar maturation and indicate DUOX1 in alveolar H₂O₂ and acid secretion by differentiated type II cells.