Genomic DNA from the mouse pulmonary surfactant protein C (SP-C) gene was analyzed in transgenic mice in order to identify DNA essential for alveolar type II cell specific expression. SP-C promoter constructs extending either 13KB or 4.8KB upstream of the transcription start site directed lung specific expression of the bacterial chloramphenicol acetyl transferase (CAT) reporter gene. In situ hybridization analysis demonstrated alveolar cell specific expression in the lungs of adult transgenic mice, and the pattern of 4.8 SP-C-CAT expression during development paralleled that of the endogenous SP-C gene. Using deletion constructs, lung-specific, low level CAT activity was detected in tissue assays of SP-C-CAT transgenic mice retaining 318 bp of the promoter. In transient and stable cell transfection experiments, the 4.8KB SP-C promoter was 90-fold more active as a stably integrated gene. These findings indicate that 1) the 4.8KB SP-C promoter is sufficient to direct cell specific and developmental expression, 2) an enhancer essential for lung specific expression maps to the proximal 318 bp promoter, and 3) the activity of the 4.8KB SP-C promoter construct is highly dependent upon its chromatin environment.