Injured ATI cells are replaced following the proliferation and transformation of ATII cells to new ATI cells. RTI₄₀ is an ATI cell-specific protein required for normal lung development. We hypothesised that intermediate cell types in the ATII-to-ATI cell transformation would coexpress RTI₄₀ and ATII cell-selective proteins. To test this hypothesis we used a rat model of Staphylococcus aureus-induced acute lung injury and a panel of ATI and ATII cell -specific and -selective antibodies. S. aureus induced an acute inflammatory reaction that is resolving by Day 3 post-inoculation. At Day 3 postinoculation, the alveolar wall is thickened secondary to ATII cell hyperplasia. Using confocal microscopy, there was a 5-fold increase in the fractional surface area of alveolar walls stained with ATII cell membrane proteins (RTII₇₀ and MMC4) and a decrease in the fractional surface area associated with RTI₄₀-expressing cells. S. aureus-treated lungs also contained unique cell types which coexpressed RTI₄₀ and ATII markers; RTI₄₀/MMC4/RTII₇₀- and RTI₄₀/MMC4- positive cells. These cells were not observed in control lungs. RTI₄₀/MMC4-positive cells were also found in cultured ATII cells before they transformed to an ATI-like phenotype. Our data suggest that RTI₄₀/MMC4/RTII₇₀- and RTI₄₀/MMC4 -positive cells are intermediates in the ATII to ATI cell transformation. These data also suggest that the coexpression of RTI₄₀ with ATII cell proteins may be used to identify and investigate ATII cell transdifferentiation to ATI cells following injury.