We tested the hypothesis that interleukin 1-(IL-1)-induced cortisol synthesis stimulates distal lung fluid absorption in fetal guinea pigs via induction of serum- and glucocorticoid-induced kinase (SGK) and inhibition of neural precursor cell expressed, developmentally down-regulated protein 4-2 (Nedd4-2). IL-1 was subcutaneously administered daily to timed-pregnant guinea pigs over three days. Fetuses were obtained by abdominal hysterotomy at gestation days (GD) 61 and 68 and instilled with an isosmolar 5% albumin solution into the lungs. Distal lung fluid movement was measured over 1 h from the change in distal airspace protein concentration. At GD61, fetal lungs were secreting lung fluid, while absorbing lung fluid at GD68. Distal lung fluid absorption was induced at GD61 by IL-1, but unaffected at GD68. Plasma cortisol concentrations were increased by IL-1 at GD61 and endogenously at GD68. Distal lung fluid absorption was measured and correlated to SGK and Nedd4-2 expression and to ENaC expression. SGK was increased by IL-1 and late during gestation (GD68), while Nedd4-2 was decreased by IL-1 and late during gestation. ENaC was induced by IL-1 at GD61 and increased late during gestation. Thus, our study suggests that cortisol-stimulated fetal lung fluid absorption is mediated by increased ENaC expression and may be governed by the SGK/Nedd4-2 pathway. These observations may explain why babies delivered preterm after intrauterine inflammation has a reduced risk of developing severe respiratory distress.