Macrophage migration inhibitory factor (MIF) is a pleiotropic proinflammatory cytokine involved in acute lung injury and other processes such as wound repair and tumor growth. MIF exerts pro-proliferative effects on a variety of cell types including monocytes/macrophages, B cells, and gastric epithelial cell lines through binding to the MHC type II associated invariant chain, CD74. In acute lung injury, inflammatory damage of the alveolar epithelium leads to loss of type I alveolar epithelial cells (AEC-I) which are replaced by proliferation and differentiation of type II alveolar epithelial cells (AEC-II). In this study we have investigated the potential of MIF to contribute to alveolar repair by stimulating alveolar epithelial cell proliferation. We show that murine AEC-II, but not AEC-I, express high surface levels of CD74 in vivo. Culture of AEC-II in vitro resulted in decreased mRNA levels for CD74 and loss of surface CD74 expression, which correlated with a transition of AEC-II to an AEC-I like phenotype. MIF stimulation of AEC-II induced rapid and prolonged phosphorylation of ERK1/2 and AKT, increased expression of cyclins D1 and E, as well as AEC-II proliferation. Corresponding MIF signaling and enhanced thymidine incorporation was observed after MIF stimulation of MLE-12 cells transfected to overexpress CD74. In contrast, MIF did not induce MAPK activation, gene transcription or increased proliferation in differentiated AEC-I like cells that lack CD74. These data suggest a previously unidentified role of MIF-CD74 interaction by inducing proliferation of AEC-II, which may contribute to alveolar repair.